The IASB proposes to defer the effective date of the new revenue standard

The IASB proposes to defer the

On 28 April 2015, the International Accounting Standards Board (IASB) voted to publish an exposure draft (ED) proposing a one-year deferral of the effective date of the revenue standard to 1 January 2018.

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On 28 April 2015, the International Accounting Standards Board (IASB) voted to publish an exposure draft (ED) proposing a one-year deferral of the effective date of the revenue standard to 1 January 2018. 

The IASB and FASB Joint Transition Resource Group have discussed a number of application issues and some companies have called for more time to implement the new requirements, due to the significance of the changes they face and the complexity of the IT solutions needed.  The U.S. Financial Accounting Standards Board (FASB) has voted to propose a one-year deferral of the effective date of the standard earlier in April 2015.  Accordingly, the IASB is planning to issue an ED with proposed clarifications to the standard as well as to keep the effective date of the IASB’s and the FASB’s revenue standard aligned.

Around a year back, on 28 May 2014, the FASB and the IASB had issued a new accounting standard ASC Topic 606/IFRS 15 Revenue from Contracts with Customers. For entities applying IFRS, the new standard was to be effective for annual periods beginning on or after 1 January 2017 with early adoption permitted. For public entities applying U.S.GAAP, it was to be effective for annual periods beginning on or after 15 December 2016 and interim periods thereafter (there was a one year deferral for non- public entities). Under IFRS, this standard will replace IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC- 31 Revenue- Barter Transactions Involving Advertising Services.

The IASB will consult on the proposed deferral of the effective date by one-year before it is confirmed, as it is required by its due process. Early application of the standard would, however, still be permitted.
 
Impact on Ind AS roadmap

The Ministry of Corporate Affairs (MCA) on 16 February 2015 published 39 Indian Accounting Standards (Ind AS), which are converged with IFRS. Amongst these, the MCA issued Ind AS 115 Revenue from Contracts with Customers with a mandatory adoption date for prescribed class of companies for financial years beginning on or after 1 April 2016 together with comparative information for the previous year. Ind AS 115 is aligned to IFRS 15 Revenue from Contracts with Customers.

The proposal of the IASB to a one-year deferral of the effective date of the revenue standard does not automatically mean deferral of the Ind AS 115 in India.  India is adopting the global standard on revenue before the rest of the world does.  The current version of the Ind AS do not include corresponding standards to IAS 11 and IAS 18.


Next steps

Globally both the IASB and the FASB are proposing to defer the adoption date of the new revenue standard by one year. Taking into account the reasons for this proposed move, it may be appropriate for the MCA to seek and consider feedback from Indian companies on the level of preparedness and challenges being faced in adoption of the new standard on revenue.  The MCA should consider taking proactive and practical measures, as required, to alleviate any hardships that Indian companies may face due to the earlier adoption of this new standard on revenue recognition.

© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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