IFRS 15 – Time is the Limiting Factor
Transparency has been requested by the regulators on the impact of the implementation on IFRS 15. This news tells us what the regulators are focusing on and why it is the high time to start doing some tasks.
Companies will need to adopt several new accounting standards and these major changes will occur in the next couple of years. For various organizations, it will be the most substantial modification in accounting since the adoption of IFRS
What needs to be done?
A company is required to reveal the influence of adopting new accounting standards that are issued but not yet active. This has factually been achieved through disclosure that the company ‘is currently assessing the impact of adopting IFRS X’. Controllers no longer consider this disclosure to be sufficient.
ESMA lately made available a public statement advising reporters to afford relevant and transparent information about the probable impact of IFRS 15. This was more than the predictable request for best workout disclosure. ESMA is specific about the disclosures including guidance for both 2016 and 2017 breaks. There is also an emphasis that disclosures should be entity precise. The revelations for 2017 year-ends should be measurable. This seems reasonable given entities will have accepted the new standard by the time they report but this is still a change from the previous practice.
This message was resonated at a current Emerging Issues Task Force (EITF) meeting in the US. The EITF supports the US regulator, the FASB, to resolve financial accounting matters. The SEC Observer at the meeting announced that the SEC thinks registrants to provide disclosure on the possible impact and the status of their adoption of the new revenue, leasing, and credit loss standards. The SEC Observer was attentive on the upcoming year end filings and was clear that this is useful to foreign private issuers as well.
The controllers are calling for revelation, but, more importantly, it can be taken as a notice that companies need to start working on implementation of the new standards now. IFRS 15, IFRS 16 and IFRS 9 are expected to have a significant impact on companies and can be intricate to apply. For more information about some of the difficulties in the new standards, our new regular IFRS 15 column starts in the next edition.