The clock is ticking! While businesses in North America and Europe have been working to comply with their respective revenue recognition standards, ASC 606 and IFRS 15, organisations in Australia have their own standard to comply with: AASB 15, developed and maintained by the Australian Accounting Standards Board.
Accounting and finance departments should have already changed systems and accounting practices to be ready by 1 January 2018 for the new standard taking effect for annual reporting periods starting from 1 January 2018. The new accounting standard applies to all contracts with customers and may change how you do business. The first step to revenue recognition compliance is understanding the new model and how it will affect your company.
The core principle of AASB 15 is to recognise revenue to depict transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or service. To achieve revenue recognition the standard establishes a five-step model that an entity applies.
- Identify the contracts
- Identify the performance obligations
- Determine the transaction price
- Allocate the transaction price
- Recognise revenue upon satisfaction of the obligation
How will AASB 15 affect your organisation?
Many organisations underestimate the effort, time, and resources required to become AASB 15-compliant. Each organisation will be impacted differently so there is no universal checklist to review, but below are some considerations to make when preparing for compliance:
- Changes to systems, processes, and controls
- Timing of recognition and amount of revenue recognised may change
- Substantial new disclosures will be required
- Long-term contract negotiations may be affected
How can FinancialForce help you?
Prepare for the new AASB 15 standards and centralize revenue streams in a single revenue recognition solution. Put an end to error-prone spreadsheets, automate calculations, reduce your period-end close and gain a complete picture of your organization’s revenue – both recognised and deferred.
FinancialForce Revenue Recognition can help your business:
- Be AASB 15-compliant
- Eliminate complex spreadsheets
- Track all revenue streams with ease in a system that supports any business scenario
- Improve the auditability and visibility of your revenue recognition data
- Get complete revenue and forecasting visibility
Learn more about Revenue Recognition and how FinancialForce can help you with AASB 15 compliance in the CFO Guide to Rev Rec here.