The IASB recently called for stakeholder feedback to inform its review of the accounting standard for revenue from contracts with customers, IFRS 15.

This is part of the regular post-implementation review process “to assess whether the effects of applying the new requirements on users of financial statements, preparers, auditors and regulators are those the IASB intended when it developed the requirements.” You’ll recall that IFRS 15 became effective for annual periods beginning on or after January 1, 2018, so that’s a significant body of experience by now.

Here’s how the document summarizes the IASB’s impressions to date:

• Initial feedback suggests that IFRS 15 has achieved its objective and is working well, though some stakeholders still find applying aspects of the requirements challenging. Stakeholders generally see the five-step revenue recognition model as helpful—in particular, as a robust basis for analyzing complex transactions.
• Stakeholders observed that implementing IFRS 15 involved a significant learning process for entities. They commented that the Standard is complex and most entities took time to understand the concepts and terminology, often turning to accounting firms for advice on developing accounting policies. Therefore, a few stakeholders suggested that the Standard might be too complex to apply for smaller entities and for entities in emerging economies.
• Stakeholders reported that IFRS 15 has improved the comparability of revenue information among entities within the same industry, among industries and among entities in various capital markets. They attributed some of these improvements to convergence between IASB and FASB requirements. However, some stakeholders said entities need to use significant judgement in applying the requirements in IFRS 15 to complex fact patterns, which might lead to inconsistent outcomes among entities.
• Most feedback during phase 1 of the post-implementation review related to application matters. Many stakeholders observed that although applying IFRS 15 was initially challenging, entities have now developed accounting policies. Some stakeholders cautioned the IASB against making any fundamental changes to IFRS 15 that would result in further disruption.
• The cost and effort incurred by an entity in implementing IFRS 15 varied depending on the entity’s industry, contract types, previous judgements and former accounting system. Many stakeholders reported that implementing IFRS  15 was challenging and costly, but that incremental costs have decreased. Some stakeholders mentioned that implementing IFRS 15 had resulted in further benefits, including better knowledge of contracts, improved internal controls and enhanced cooperation between accounting and business functions within entities. Overall, most stakeholders expressed a view that the benefits of IFRS 15 outweigh the costs of implementing and applying the Standard.

This blog was at its most popular during the run-up to implementing IFRS 15: many of the posts I wrote back then on nuts and bolts issues (costs to fulfil a contract, identifying material rights, etc.) rank among the most viewed of my 700 posts. Most popular of all – and still often searched to this day – was the entry on recognizing non-refundable upfront fees. That aspect of IFRS 15 was probably particularly irritating to some preparers because it affected an area in which they’d already recently changed their previous practices (I gave the example of the TMX Group, which in its IFRS transition disclosures reported that it would recognize certain initial and additional listing fees in full under IFRS in the period in which the listings occur; previously, under old Canadian GAAP, it initially recorded these fees as deferred revenue and then recognized them on a straight-line basis over an estimated period of ten years; IFRS 15 triggered a further revision to the policy, again away from immediate recognition) and, perhaps, because that aspect of the standard doesn’t always accord with one’s intuitive sense of what might be reasonable. The new document doesn’t specifically raise that issue, but it gives some examples of recurring difficulties in related areas:

• Initial feedback suggests that many entities have largely overcome initial challenges related to determining whether to recognize revenue over time or at a point in time. However, in some cases, for example, in the software development, gaming and construction industries, some challenges remain. Some stakeholders said that assessments based on (whether the entity’s performance creates an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date) can be especially challenging, notably in relation to the enforceability of an entity’s right to payment.

Here’s another area where a bit more guidance would probably be useful:

• Initial feedback suggests that some stakeholders are unsure how to account for incentives offered in three-way arrangements when a party acting as an agent pays a marketing incentive to end customers—for example, when a digital platform entity offers incentives to end customers who buy goods or services such as food delivery or taxi services through the platform.
• The feedback suggests that some entities treat these incentives as payments to customers and so account for them as reductions of revenue. Other entities treat these incentives as marketing expenses. This diversity in application might reduce the usefulness of revenue information to users of financial statements.

Overall though, it would be surprising if the project resulted in more than incremental fine-tuning…

The opinions expressed are solely those of the author.