The new IFRS 15 standard : implementation challenges for Belgian companies

Abstract

From 01/01/2018, entities reporting under IFRS will have to recognize revenue from customer contracts according to a new standard: IFRS 15 Revenue from Contracts with Customers.

Superseding the current IFRS guidance on revenue (IAS 11, IAS 18 and their interpretations), IFRS 15 is a project jointly conducted by both the IASB and the FASB. Indeed, current IFRS (IASB) on revenue is limited in terms of guidance while current US GAAP (FASB) is too prescriptive and specific. This sometimes results in inconsistent outcomes for both set of rules, with similar transactions accounted for differently. IFRS 15 was issued in a way that entities could rely on a more comprehensive single set of rules, which would harmonize revenue accounting and allow for better comparisons between entities’ financial statements.

Since revenue is the key driver of an important majority (if not the totality) of companies, a new revenue standard represents an important change in their accounting and daily functioning. That is why we wanted to study the challenges and impacts the implementation of IFRS 15 stands for in Belgian companies. However, since the application of IFRS 15 is foreseen from 2018, a measurement of the impacts on financial statements is not possible yet.

Following an explanation of the main principles of IFRS 15 and the identification of the main changes against current IFRS (from a general and sectorial perspective), the study analyses the current situation of the standard amongst Belgian entities. Via the presentation of a concrete IFRS 15 implementation project and an on-line survey among Belgian entities (using IFRS for consolidation purposes), the sudy focuses on three main topics: the current progress of IFRS 15 in Belgium, the accounting and extra accounting challenges related to its implementation and the opinion of Belgian companies about it. The results of the study could be summarized as follows: despite an (overall) limited progress in the implementation process, Belgian entities already consider IFRS 15 an unecessary change, notably because of its complexity and the implementation efforts it requires. This opinion is a bit biased though. IFRS 15 is surely more complicated than IAS 11 and IAS 18 but those standards were not adapted anymore to today’s transactions. However, with its more complete guidance, we believe IFRS 15 will remove the (above mentioned) diversity of practices and work for a more harmonized revenue reporting.