While entities with 30 June reporting commitments will be very busy over the next couple of months, those with a 31 December date should begin considering AASB 15 Revenue from Customer Contracts – its effective date is 1 January.
AASB 15 is likely to result in changes to reported results, customer contracts, bank covenants, budgets, IT systems, accounting manuals and disclosure templates.
Its implementation will be the responsibility of not only the ﬁnance team. Various staff will need to ensure that the transition is accurate, seamless and minimises stakeholders’ surprises.
The time needed to determine AASB 15’s impact will be signiﬁcant. Each aspect of the contract and revenue process will need to be scrutinised, and a plan for implementation developed.
Most steps will require a third balance sheet (as at that date) and comparatives at the end of the 2017 financial year. AASB 15 requires a five-step process:
• Step 1: Identify the contract
• Step 2: Identify performance obligations in it
• Step 3: Determine the transaction price
• Step 4: Allocate transaction price to performance obligations, and
• Step 5: Recognise revenue when performance obligations are met.
Simple? Well, perhaps not. To get you started on it, here is a 10-point plan:
1. Find time to consider AASB 15 – we are all busy but this can’t be ignored
2. Understand existing revenue-recognition practices, including reviewing existing contracts with customers
3. Read AASB 15 in the context of your organisation and its existing contracts – identify areas of potential change
4. Apply the requirements of AASB 15 to them and understand their impact
5. Form an implementation committee with representatives from relevant divisions or external advisors (legal, ﬁnance, sales, contract management, project management)
6. Identify deﬁciencies in existing systems that will prevent your capturing relevant AASB 15 information
7. Determine whether changes to existing contracts are needed
8. Formulate a communications strategy for key stakeholders, for instance, banks, shareholders and most importantly customers
9. Develop a project, plan, and
10. Seek expert assistance.
As for 30-June balancers, remember your obligations under AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to disclose the effect of standards issued that are not yet effective. As we move towards AASB 15’s effective date, an entity should be able to quantify its effect.