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.
- Expert IFRS 15 and revenue recognition advice
- Step-by-step support through new rules
- Review and update of your company’s contracts
- Guidance for software and system updates
- Help with filing and meeting UAE laws
- Free one-hour consultation for first-time clients
For more information:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Contact/WhatsApp: +971 50 276 2132
