The International Accounting Standards has issued an amendment to its revenue recognition standard, IFRS 15 Revenue from Contracts with Customers, formalizing the deferral of the effective date by one year until 2018.
The IASB and the U.S. Financial Accounting Standards Board issued the long-awaited converged revenue recognition standard last year, but soon heard from many companies that they needed more time to implement the standard. Both boards agreed to defer the standard for one year to stay in sync, and FASB has also formalized the postponement with an accounting standards update last month (see FASB Makes It Official on Deferral of Revenue Recognition).
The publication of the International Financial Reporting Standards amendment stems from the IASB’s decision in July to defer the effective date from Jan. 1, 2017 to Jan. 1, 2018, after considering the feedback to its consultation. Companies applying IFRS continue to have the option to apply the standard early.
The main reason for the amendment, according to the IASB, is that the IASB is currently consulting on some proposed clarifications to the standard. The proposals follow discussions within the joint Transition Resource Group, or TRG, established by the IASB and FASB after the revenue standard was issued in May 2014 to support companies in its implementation.
The TRG recommended the delay, along with extra guidance in the areas of licensing revenue and principal vs. agent performance obligations (see FASB Proposes to Clarify Revenue Recognition Standard and IASB Proposes Changes in Revenue Recognition Standard).
Consultation on the proposed IFRS clarifications ends on Oct. 28, 2015. The IASB expects to complete its discussions on the clarifications in light of the feedback it receives by the end of 2015, after which any final amendments to the standard will be issued.
For FASB, the new effective date of the standard under U.S. GAAP differs somewhat from the IASB for IFRS and is more complicated than simply pushing it back until Jan. 1, 2018. In its accounting standards update, FASB said public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the new standard to annual reporting periods beginning after Dec. 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after Dec. 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance to annual reporting periods beginning after Dec. 15, 2018, and interim reporting periods within annual reporting periods beginning after Dec. 15, 2019.
All other entities may apply the guidance earlier as of an annual reporting period beginning after Dec. 15, 2016, including interim reporting periods within that reporting period. All other entities also can apply the guidance earlier as of an annual reporting period beginning after Dec. 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance.
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