IFRS 15 Application in Financial Statements Guide

Introduction to IFRS 15 and Revenue Reporting

Companies in Dubai follow International Financial Reporting Standards (IFRS) to stay compliant. IFRS 15, called ‘Revenue from Contracts with Customers’, sets new rules for reporting revenue in financial statements. When a company offers many products or services, applying IFRS 15 needs careful review of customer agreements and each transaction.

Firms should check their revenue contracts, make detailed reviews, and ensure each contract matches the reporting requirements. This standard matters for companies wanting clear and transparent financial statements.

IFRS 15 vs. Previous Revenue Standards

IFRS 15 came into effect on 1 January 2018. It replaced old rules like IAS 11 (Construction Contracts) and IAS 18 (Revenues). Companies who used old standards now face new ways to record revenue. The new standard also asks for more disclosures in financial statements.

Key changes with IFRS 15:

Companies must change revenue procedures
Extra details are needed for final financial reports
Big impact on firms with complicated contracts or multi-layer revenue deals

Essential Reporting Requirements under IFRS 15

Companies can use either a full retrospective approach or a modified one, depending on what the standard allows. Before they update their systems or choose new software, companies must make sure these changes cover every recent standard, like IFRS 9 or IFRS 16. This step keeps reporting accurate and complete.

Common Challenges in Applying IFRS 15

Many businesses face problems when they implement IFRS 15. Bundled packages, like goods and services together, must be separated for proper revenue timing. Free services or goods with purchases count as incentives and should be recorded properly.

There are special rules for:

Long-term contracts
Licensing deals
Contract costs

Companies must update old policies for timing and amount of revenue.

Main challenges include:

Separating bundled goods and services
Managing variable contracts
Adjusting to new guidance for licenses and long-term deals

Five Steps to Revenue Recognition under IFRS 15

Every business must follow five steps for revenue recognition:

Identify the Contract:
Make a formal agreement with the customer, showing all rights and duties.
Separate Performance Obligations:
List every duty the company must perform under the contract.
Determine Transaction Price:
Agree on how much the customer will pay for goods or services.
Allocate the Transaction Price:
Split the contract price between each listed obligation.
Recognize Revenue:
Record revenue when the company finishes each obligation, either over time or at a specific moment.

Revenue Arrangements Most Affected by IFRS 15

Some deals get a bigger impact from IFRS 15:

Bundled sales: Goods with warranties or maintenance included
Customized deals: Each contract changes for every customer
Variable pricing: Product prices change with payment installments
Complex licenses: Software sales and maintenance contracts combined

These need close attention for correct revenue recognition.

How Mubarak Al Ketbi (MAK) Auditing Supports IFRS 15 Compliance

Mubarak Al Ketbi (MAK) Auditing uses strong experience to help clients with IFRS 15. The team provides accounting and advisory services to many sectors. Experts help companies:

Check and update reporting systems
Assess impacts of IFRS 15
Keep records matching best practices in the region
Complete compliance tasks on time

How Mubarak Al Ketbi (MAK) Auditing Can Help You

When you want your IFRS 15 work done right, don’t let the ball drop! Mubarak Al Ketbi (MAK) Auditing gives professional help for every part of your financial reporting.