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Global survey finds only 25% of business expect to be ready for current 2017 implementation date - IASB to meet today to discuss implementation timing
As the International Accounting Standards Board (IASB) meets today to discuss the 2017 implementation date for new global revenue recognition rules, Grant Thornton is asking the accounting board to delay implementation, as a global business survey finds that many businesses are not expecting to be ready by 2017.
Grant Thornton’s International Business Report, a survey of 2,580 businesses in 35 economies found only 25% expect to be ready for implementation by 2017. In the G7 that number drops to 22%, and in major countries even further: US 20%, France 16%, Australia 13%, China 10%, Japan 9% and Germany 8%.
“Now that companies have started their implementation projects we've learned more about the challenges they face," said Andrew Watchman, Grant Thornton's global head of IFRS. "Our survey backs up what we're hearing from our clients – that many companies are struggling to meet the original deadline."
“IFRS 15 is likely to have a greater impact outside of the accounting function (eg compensation, contracting, broad policies and systems) than most new standards, and even those entities that have worked hard to prepare for transition would no doubt benefit to some extent from more time.”
The Financial Accounting Standards Board (FASB), which sets accounting regulations in the US, just voted to delay implementation.
Some of the industries that will be most affected by planned revenue recognition changes include:
- Telecoms and IT – where multiple deliverables are commonplace and current practice is mixed. Cellphone businesses that account for a 'free' handset as a marketing cost will need to change this policy and instead allocate revenue based on relative value
- Real estate – when to take revenue for 'off plan' apartment sales has been a difficult issue and the new model will shift the boundary between percentage- of-completion and on-completion revenue recognition
- Sectors where performance-based or contingent fees are commonplace, such as asset management and some legal and professional services. Under the new model variable payments would be accounted for on a best estimate basis subject to being 'reasonably assured'
- Retail - accounting for rights of return, customer loyalty schemes and warranties could all be affected.
Other areas that could be affected include deferred and advanced payments, licensing arrangements, breakage and non-refundable upfront fees.