IFRS 15 – Revenue from contracts with customers

IFRS 15 – Revenue from contracts with customers

A new global framework for revenue recognition

Picture of Dimitra Caravelis

Quality & Risk Management Partner and Head of Audit DPP

KPMG in Greece


A new way of thinking about revenue

The new revenue standard introduces a new framework that will change the way companies account for revenue. Published jointly by the IASB and FASB in May 2014 and amended in April 2016, it replaces all existing IFRS and US GAAP guidance on revenue and introduces a 5-step model for recognizing revenue from contracts with customers. Although there are some differences between the IFRS version of the standard (IFRS 15) and the US GAAP version (Topic 606), the wording largely is converged. Consequently, companies across the globe will be applying the same principles and guidance to revenue transactions.

The new requirements will affect different companies in different ways. For some, the new standard will have a significant impact on how and when they recognize revenue. For others, there may be little change in the timing and amount of revenue recognized. Nevertheless, arriving at this conclusion will require an understanding of the new model and an analysis of its application to particular transactions.

The 5-step model in the standard requires companies to:

  1. Identify the contract(s) with a customer
  2. Identify the performance obligations in the contract
  3. Determine the transaction price
  4. Allocate the transaction price to the performance obligations in the contract
  5. Recognize revenue when or as the entity satisfies a performance obligation

The analysis required under the 5-step model will introduce new judgements and estimates into the revenue line item in the financial statements.

The new standard will require analysis of all sales contracts to ensure the promises to the customer are identified and accounted for appropriately. Implementation efforts and costs may be significant for companies that earn the majority of their revenues under long-term contracts, particularly when those contracts include multiple goods and services.

Importantly, all companies will be subject to extensive new disclosure requirements. The standard also provides guidance on accounting for costs to obtain and costs to fulfill contracts with customers, which may change the timing of recognition for those costs.


The impacts may be felt across the organization

  • Revenue recognition may be accelerated or deferred
  • Sales and contracting content and processes may be reconsidered
  • IT systems may need to be updated or new modules added to calculate revenue
  • Accounting processes and internal controls will need to be changed and documented
  • Extensive new disclosures will be required, including the expected timing and amounts of future revenues
  • Revisions may be needed to tax planning, covenant compliance and sales incentive plans
  • Expected impacts leading up to adoption and changes reported upon transition will need to be explained to internal and external stakeholders


Effective date – time is running out

With less than one year to go for most entities, the effective date IFRS 15 and Topic 606 is fast approaching. Calendar year companies will be required to apply the new standard for year ends beginning on January 1, 2018. Non-public companies applying US GAAP have an extra year with an effective date for annual periods beginning on or after December 16, 2018.

Companies are frequently surprised at the length and complexity of the implementation phase. If you haven’t done so already, it’s time to engage and start looking at your customer contracts in order to meet regulator and stakeholder expectations.



Accounting for revenue is changing – What’s the impact on your business? [PDF 234 KB] This publication is designed to help you assess the potential impact of the new standard on your business.

IFRS 15 Revenue — It’s time to engage, First Impressions: 2016 edition IFRS This edition is a digestible introduction to the amended version of the new standard and its possible impacts for your business.

Revenue Issues In-Depth, Second edition: IFRS and US GAAP Issues in-depth [PDF 2.54 MB] This publication is our in-depth guide to the new IFRS and US GAAP revenue standard. It provides detailed analysis, pooling the insights and experience of our revenue recognition teams globally to guide you through the new requirements. It also addresses the question ‘how does this compare with my current accounting?' by including comparisons with current IFRS and US GAAP requirements.

Revenue for Telecoms — Issues In-Depth [PDF 1.35 MB] This is an Industry-specific publication, which provides a comprehensive and illustrated understanding of how to apply IFRS 15 to common telecoms transactions.

Guide to annual financial statements – IFRS 15 supplement [PDF 1.45 MB] This is a supplement to our Guide to IFRS Financial Statements that focuses on the disclosure requirements in the new revenue recognition standard.

Revenue Transition options — What is the best option for your business? This publication is intended to help you choose the best transition option for your business, identifying a set of core issues and some simple steps you can take now to inform your decision.

Visit our KPMG Global webpage, IFRS 15 for sectors, for a look at some of the sector-specific impacts of the new revenue standard.

Visit our KPMG Global webpage, IFRS – Revenue to learn more on the joint standard on revenue recognition from the IASB and FASB.

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