“IASB review concludes the revenue Standard is working as intended,” announces a recent news release.

This announced the publication of the Project Summary and Feedback Statement relating to the Post-Implementation review of IFRS 15. These are the headline conclusions:

• there are no fundamental questions (fatal flaws) about the clarity or suitability of the core objectives or principles in the requirements;
• the benefits to users of financial statements of the information arising from applying the requirements in IFRS 15 are not significantly lower than was expected; and
• the costs of applying the requirements and auditing and enforcing their application are not significantly greater than was expected.

That doesn’t mean of course that applying and auditing and enforcing the standard is easy (or cheap), just that it’s no more difficult or expensive than anticipated. The IASB did note a few low-priority items to be considered in its next agenda consultation – this is one of the more interesting ones:

• …many stakeholders said that entities— especially in service industries—sometimes struggle to apply the concept of control and the related indicators in determining whether an entity is a principal or an agent. Some said the judgement involved in analyzing arrangements could result in diversity in practice or said they observed inconsistent outcomes—in particular, for online e-commerce platforms and internet advertising services, and in the consumer goods and retail, fintech and technology-based industries.

The IASB concluded that “most of the difficulties in assessing control over services and intangible assets arise from market developments since IFRS 15 was issued. With increasing digitalization, more entities might be struggling to apply the requirements consistently and the costs of applying the requirements might have increased.” The Board rejected though some of the specific suggestions made, such as expanding the list of indicators of control, or of providing application guidance and/or up-to-date illustrative examples for challenging fact patterns. It comments: “stakeholders’ challenges are often linked to complex transactions that include many unique features, terms and conditions. In the IASB’s view, providing additional illustrative examples or developing additional control indicators would be unlikely to lead to significant improvements, or help a wide variety of stakeholders, because the outcome of the principal-versus-agent assessment depends on the specific facts and circumstances of each arrangement.” Still, as noted, they’ll take another look in the future: this probably makes sense given the possible highly material impact of that assessment. As we noted here, some respondents suggested partially alleviating the issue by disclosing in close-call situations what the revenue would have been had the judgment been made differently. The IASB rejected this idea, without saying much about why (I personally think it was worth pursuing).

Another of the more common areas is that of accounting for consideration paid to a customer, with examples relating to discounts, bonuses, loyalty points or cashback offered by digital platform entities (such as food-ordering and ride-hailing platforms), online distributors of retail and consumer goods, and fintech entities. This issue sometimes leads to “negative revenue”, in which the consideration payable to a customer exceeds the amount of consideration expected to be received from the customer: a key question there is whether and in what circumstances an entity reclassifies ‘negative’ revenue and presents it in an ‘expenses’ category. The IASB acknowledged the diversity in practice, but concluded that this too can wait for the next agenda consultation. It’s notable that in this area as well, the application challenges often reflect technological and other developments even in the few years since IFRS 15 was issued: it’s no doubt satisfying to the IASB then that there’s no broader challenge to the standard’s ability to provide relevant and reliable information on such new-paradigm revenue.

Still, business structures are often now so complex in their intertwining of services, and frankly so accepting of losing money for the foreseeable future, that it might sometimes be beyond any standard to extract a meaningful “revenue” number from the morass of activity. In that vein, on the issue of determining when to recognize revenue, the document indicates that “stakeholders asked for additional guidance, illustrative examples and/or educational materials— most commonly for complex arrangements in the technology, software, gaming and construction industries.” But the IASB notes once again that that judgement is inherent in applying principle-based requirements, and reminds the reader of its past conclusion “that it would not be feasible to consider all possible methods and prescribe when an entity would use each method.” In this and other regards, the report allows the IASB to send the same message I noted a while ago in the context of the post-implementation review of IFRS 9: if you think its standards (considering their length and degree of detail) are no longer truly “principle-based” in the way that the old, shorter standards were – well, then you’re wrong!

The opinions expressed are solely those of the author.