IFRS 15 Implications

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Aircraft engine maker Rolls-Royce currently seems to be the prime example of how the new revenue recognition standard might affect reporting practice of specific industries, especially if the business model does not fully align with how the standard defines contracts and performance obligtions (see also this interesting article in the WSJ). A reporting impact of more than $900 million for last year's reported revenue suggests quite a shift in the distribution of revenue over time.

Are you aware of any other interesting cases regarding the potential implications of IFRS 15? In the Rolls-Royce example, analysts seem to welcome the reporting changes as the "new standard provides investors with more clarity" (see WSJ article).

Also, it seems that the new standard calls for a comprehensive and structured contract management system in place. But what if this is not the case? Will IFRS 15 not only have reporting implications, but actual implications on how companies run their business? What are your thoughts on this?

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  • Christoph J. Sextroh's picture
    Christoph J. Sextroh
    October 31, 2017 06:52 PM

    Please share your thoughts...

  • Ties de Kok's picture
    Ties de Kok
    November 08, 2017 03:21 PM

    Would you mind sharing the link to the WSJ article? I can't click it in your post.

  • Mark Clatworthy's picture
    Mark Clatworthy
    January 30, 2018 04:21 PM

    This is an interesting thread with widespread implications. The BBC's business presenter Dominic O'Connell is implicating IFRS 15 in Carillion's failure before it was even introduced! Rolls Royce presents material from a workshop on IFRS 15 on its website, illustrating the potential impact of this major accounting change (https://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/invest...). They estimate a reduction in revenue of over £900m for 2015 for their civil (original equipment and approved maintenance) . It's a helpful presentation, but count how many times the words 'Cash flows are not affected' or some variation, appear.

  • Mark Clatworthy's picture
    Mark Clatworthy
    January 30, 2018 04:22 PM

    The BBC article on Carillion by Dominic O'Connell is here http://www.bbc.co.uk/news/business-42744949