Changes in Reporting after Adoption of AASB 15: Revenue Recognition

Executive summary
This assignment aims to discuss briefly the changes occurred in reporting after
the application of new accounting standard AASB 15: Revenue recognition of
contracts with customers. This is provided along with a real time example of an
ASX Listed company to understand the effects of implementation of such
standard in the financial reporting of the company. It also came to notice during
the course of the assignment that the inventory ownership and its recognition be
a little affected due to the change in the timing of recognition of such inventory
in the name of the company. The other standards on accounting will have no
impact or less impact with the introduction of this new accounting standard on
revenue, that is AASB 15: revenue from contracts with customers

Table of Contents
Introduction........................................................................................................... 3
Part A..................................................................................................................... 3
Revenue Recognition and Requirements as per AASB 15..................................3
Measurement of Revenue according to AASB 15................................................4
Part B..................................................................................................................... 4
Potential impact on adoption of AASB 15 in a Company....................................4
Conclusion............................................................................................................. 6
References............................................................................................................. 8
Introduction

As revenue recognition is vital for the performance of a company, it is important
to have a separate standard such as AASB 15 for dealing in the recognition of
revenue by a company in its financial statements. AASB 15, which, deal with
revenue recognition of contracts with customers, requires a company to record
the revenue in its books of accounts only when the realisation of money from
such transaction is certain. The revenue from such transaction must be readily
realisable with certainty, this standard AASB 15 includes the recognition of only
contracts related to customers, but it does not deal with the recognition of
leases, insurance contracts and financial instruments.
Part A
Revenue Recognition and Requirements as per AASB 15
Revenue recognition refers to recording of revenue from contracts or customers
in the books of accounts; this is in accordance with regulatory requirements in
form of standards on accounting issues by AASB. The applicable Accounting
standard for recognition of revenue is AASB 15, Recognition of revenue from
contracts with customers (Alexander, 2016). There is a five-stage model of
recognising revenue as per this standard that is as follows:
 The contract with the customer must be identified
 The performance obligations identified in the contract
 The transaction price to be determined (Dichev, 2017)
 The transaction price should be allocated to the transaction price
 When the obligations related to performance of that contract is satisfied
the revenue is recognised.
The company should assess the customer’s ability and concern to pay for the
contract before recognising such revenue from the contract. The price at which
the transaction takes place be recorded on pro rate to their relative standalone
prices; here standalone prices would mean those prices at which, these products
or services sold separately. The AASB 15 requires various disclosures while
reporting revenue in the financial statements of a company.
A company has to disclose all of its particulars with the customers along with any
significant judgements and changes in the judgements, made in incorporating
this standard into the company’s reporting procedures to those contracts. In
addition, there is compulsory disclosure of any capitalised cost that incurred for
fulfilling a contract with the customer. This AASB 15 is compulsory for all the ASX
listed entities to incorporate in its accounting process for financial reporting
beginning on or after 1-01-2018 (Mun, 2018).
Measurement of Revenue according to AASB 15
The revenue measured is in accordance with the agreed transaction amount for
the sale of such goods or services to the customers, it excludes any agreed third
party payments, which would normally include tax, transportation cost, etc. Even