Institute issues response to Post-implementation review of IFRS 15

In its response to the International Accounting Standards Board’s (IASB) Request for information on the Post-implementation review of IFRS 15 Revenue from Contracts with Customers, the Institute’s Financial Reporting Technical Committee agreed that IFRS 15 has achieved its objectives and is working well, with some aspects challenging to apply.

IFRS 15 became effective for periods commencing on or after 1 January 2018, and in June 2023 the IASB issued their request for information to form part of the post-implementation review process. The objective of a post-implementation review is to assess whether the effects of applying the new requirements on users of financial statements, preparers, auditors and regulators are those the IASB intended when it developed the requirements.

Whilst supporting the strong framework provided by the five-step framework in IFRS 15, the Institute made some recommendations and comments in its submission, including;

• Further guidance is required to support the standard in some instances. This is particularly required in response to the fact that some entities have changed the way in which they operate since IFRS 15 was initially issued.
• The benefits of the standards outweigh the costs of implementing it.
• Further guidance is needed in relation to the identification of performance obligations of a contract in certain scenarios (eg. Software as a service contracts, distinct vs indistinct services and software updates).
• Further guidance is needed in relation to accounting for sales based taxes due to diversity in accounting practices being applied.
• Principal vs Agent considerations are one of the more challenging aspects of IFRS 15 to apply and further clarifications and guidance are needed, particularly in the area of the clarification of the concept of control.
• Further guidance is needed in relation to the interaction of IFRS 15 with other standards, including
  • IFRS 3 Business Combinations
  • IFRS 9 Financial Instruments
  • IFRS 16 Leases
  • IFRS 10 Consolidated Financial Statements
• The Institute believes that the level of convergence achieved to date on IFRS 15 and US GAAP is important and any changes to US GAAP or IFRS 15 should be monitored in this regard.