In the last three years, the International Accounting Standards Board or IASB has issued four new major International Financial Reporting Standards (IFRS). First on the list was the final version of IFRS 9, the new standard on financial instruments, followed by IFRS 15, the new revenue recognition standard. Both standards were issued in 2014 and are effective for annual periods beginning Jan. 1, 2018. In 2016, the IASB issued IFRS 16, the new leases standard, which will be effective in 2019. And last, but certainly not the least, came IFRS 17, the much-anticipated new standard on insurance, which takes effect in 2021.
In 1997, the International Accounting Standards Board’s predecessor first set up a steering committee to carry out initial work on what was then called the “Insurance project,” and nobody expected that it would take 20 years to publish the final result. With the issuance of the new insurance accounting standard called International Financial Reporting Standards (IFRS) 17, Insurance Contracts, the Board closes a long and eventful journey to define the basic objectives, accounting principles and reporting guidelines for insurance contracts. IFRS 17 was on May 18, and will become effective for annual reporting periods beginning on or after Jan. 1, 2021. Early application is permitted provided that IFRS 9, Financial Instruments, and IFRS 15, Revenue from Contracts with Customers, are also applied.
With the rapid changes in the global business environment and the brisk increase in cross-border trade and transactions, regulators, enterprises and stakeholders alike agree that it is vital to sustain the creation of International Financial Reporting Standards (IFRS) as a common and globally-accepted reference for financial reporting. However, given the depth, scope and complexity of global business, the adoption of new standards always comes with numerous challenges.
In previous Suits the C-Suite articles, we have provided an overview of the potential impact of the new revenue recognition standard, International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers, on certain industries such as telecommunications and banking. Another industry where the entities may need to change their revenue recognition policies and practices resulting from IFRS 15 is the retail and consumer products industry.
IFRS 15, Revenue from Contracts with Customers, the highly anticipated revenue standard issued by the International Accounting Standards Board (IASB), will change the rules for revenue recognition. IFRS 15 replaces all existing revenue recognition standards and provides companies and industries a comprehensive and consistent set of guidelines by which to account for revenue transactions and in preparing relevant disclosures.
(Second of two parts) In last week’s article, we discussed how the International Accounting Standards (IAS) Board released the new accounting standard on leases, International Financial Reporting Standards (IFRS) 16, Leases, early this year. We also highlighted that the standard will have an impact on different industries, and perhaps even different companies in the same industry. We focused our discussion on lessees in the retail industry, and talked about the requirements for identifying a leased asset and the considerations for determining the commencement of the lease date. We will now look at the other lessee accounting implications of IFRS 16.
International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers, is one of the latest global accounting developments that will have an impact on broker-dealers in securities and asset management entities. IFRS 15 may potentially change certain revenue recognition practices of brokers and fund managers, particularly in accounting for trade commissions, management and performance-based fees, and upfront fees. These potential changes may also affect their earnings per share ratio and other performance measures.
(First of two parts) A FEW weeks ago, the International Accounting Standards Board (IASB) issued the complete version of International Financial Reporting Standard (IFRS) 9 Financial Instruments. IFRS 9 is the culmination of the IASB’s project to replace International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement.