Blog
April 11, 2024
In the world of finance, it is really important for company-level businesses to update & adapt in response to the changes made by international accounting boards in order to align their reporting criteria as per the required standards and keep their report records up to date.
We can see a lot of rapid changes that are made by the board in this new era of accounting where every aspect of the business needs to be transparent and align with the technology.
Among various changes, IFRS-15 is the recently changed standard, which is designed to account for the revenue of various types.
Financialeey, updates its client about the recent changes made within accounting standards along with the purpose & objective, and practical implications of that change.
What is IFRS-15?
There were many standards on revenue recognition that each made for different types of businesses
i.e. Revenue recognition for construction businesses was through different standards.
In 2014, IFRS-15 was first introduced by the International Accounting Standards Board (IASB) and developed jointly with the Financial Accounting Standards Board (FASB).
IFRS-15 was proposed to various businesses in 2018, with the objective to standardize reporting systems throughout the world enhancing comparability & transparency in financial statements.
Financialeey’s complex accounting module helps its clients to account for these complex revenue methods and align their business with international standards requirements.
Key Insights of IFRS-15
Identification of the Contract: Under IFRS 15, revenue recognition begins when a contract with a customer is identified, specifying the rights and obligations of both parties.
Performance Obligations: Revenue is allocated to each distinct performance obligation in the contract based on the standalone selling price. A performance obligation is a promise to transfer a good or service to the customer.
Measurement of Revenue: The standard introduces a five-step model for recognizing revenue:
I needed a financial forecast for an expansion loan. Financially was professionally experienced and quickly turned this around. I would highly recommend them for any financial business needs.
Disclosure Requirements:
IFRS 15 imposes extensive disclosure requirements to provide stakeholders with a clear understanding of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
IFRS 15, since its adoption, has provided businesses with a more structured and principles-based approach to revenue recognition, offering several benefits in revenue accounting.
Consistency & Transparency:
Adopting IFRS-15 establishes a single, comprehensive framework for revenue accounting, promoting consistency & comparability in financial reporting among the businesses. WIth the comparability factor it enhances transparency that helps in meaningful analysis of financial insights.
Better Contract Management:
It aids the business to reassess their contract in terms of the identification of the performance obligation to be made, allocation of revenue to each separate performance obligation within one contract and to account for them once when any of the performance obligation is satisfied. Businesses, recognise their revenue on the interval of obligations, giving them tracking to identify what part of the contract is fulfilled, paid & recorded.
Facilitated Transition to New Business Models:
As businesses evolve and adopt new business models, IFRS 15 provides guidance on how to recognize revenue from these arrangements. Whether it’s subscription-based services, software licensing, or bundled offerings, the principles of IFRS 15 help businesses adapt their revenue recognition practices to meet the needs of modern business models.
Financialeey, helps their clients to make their Financial reporting up-to the required international standards. We let our clients focus & promote their principle business for which they stand for by managing all the complexities with our dedicated & experienced experts and provide the various reports on their table.
Conclusion
IFRS 15 represents a significant shift in revenue recognition practices, requiring businesses to reassess their accounting policies and processes. For financial services businesses, understanding and implementing the standard is essential for maintaining regulatory compliance and providing transparent financial reporting to stakeholders. By embracing the principles of IFRS 15, companies can enhance credibility, improve comparability, and build trust with investors and clients alike.
We lead the business to achieve the competitive advantage in the business
Grow your business with the Power of Financialeey
Royal Ln suite, 332 G, Dallas,
TX 75229, USA
info@financialeey.com
+1 469 638 3503
Copyright © 2018. POWERED BY Ayeans Development
