NOTICE
PROPOSAL: EARLY ADOPTION OF IFRS 15, REVENUE FROM CONTRACTS
WITH CUSTOMERS
(issued 28 November 2014)
IFRS 15 Revenue from Contracts with Customers was published by the International Accounting
Standards Board (IASB) in May 2014. IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
IFRS 15 is effective for annual periods beginning on or after 1 January 2017.
Earlier application is permitted.
IFRS 15 supersedes:
(a) IAS 11 Construction Contracts;
(b) IAS 18 Revenue;
(c) IFRIC 13 Customer Loyalty Programmes;
(d) IFRIC 15 Agreements for the Construction of Real Estate;
(e) IFRIC 18 Transfers of Assets from Customers; and
(f) SIC-31 Revenue—Barter Transactions Involving Advertising Services.
Reasons for issuing the IFRS
Revenue is an important number to users of financial statements in assessing an entity’s financial performance and position. However, previous revenue recognition requirements in IFRS provided limited guidance and, consequently, the two main revenue recognition Standards, IAS
18 and IAS 11, could be difficult to apply to complex transactions. In addition, IAS 18 provided limited guidance on many important revenue topics such as accounting for multiple-element arrangements.
Proposal for early adoption in Mauritius
The profile of revenue and profit recognition will change for some entities as the new Standard is more detailed and more prescriptive than the existing guidance and introduces new complexities.
The new Standard requires significantly more disclosures relating to revenue and entities will need to ensure that appropriate processes are in place to gather the information.
Telecommunications, the construction industry and residential real estate developments are the sectors that are expected to be particularly affected by IFRS 15.

TRANSITION AT A GLANCE
IFRS 15 is effective for reporting periods beginning on or after 1 January 2017 with early adoption permitted. It applies to new contracts created on or after the effective date and to existing contracts that are not yet complete as of the effective date. Therefore, the current year figures reported in the first year of adoption will be prepared as if the Standard's requirements had always been applied.
An entity can apply the revenue standard using two methods as follows:
- Under this method, an entity applies IFRS 15 retrospectively to each prior reporting period presented.
- Assuming we change the effective date to 1 January
2016, an entity opting for this method will apply the new standard to its historical transaction – and retrospectively adjust each comparative period presented in its 2015 financial statements.
An entity selecting this method recognises the cumulative effect of initially applying IFRS 15 as an adjustment against retained earnings at the date of initial application (i.e. 1 January
2016) – and makes no adjustments to its comparative information (i.e. figures for the year ending 31 December
2015 will not be restated).
If an entity uses this transition method, it must disclose the impact of the change on the financial statement line items and include a description of the significant changes.
Application of IFRS would:
(a) remove inconsistencies and weaknesses in previous revenue requirements;
(b) provide a more robust framework for addressing revenue issues;
(c) improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets.
Disclosure requirements were inadequate
The disclosure requirements in previous IFRS often resulted in information that was inadequate for investors to understand a company’s revenue, and the judgements and estimates made by the company in recognising that revenue.

Examples of the new disclosures under IFRS 15 include:
 a breakdown of the revenue number, for example, by type of customer or market;
 contract balances, including the opening and closing balances of receivables, contract assets and contract liabilities;
 information about the judgements used to determine the amount and timing of revenue; and
 assets recognised from the costs to obtain or fulfil a contract with a customer.
Ease of transition
The aim of the simplified transition method is to reduce the transition time and effort for preparers that choose this option. The requirement for entities to disclose the impact of each financial statement line item will effectively result in an entity applying both IFRS 15 and the previous revenue Standards in the year of initial application.
Time and cost
Time and cost are two important considerations to decide if it is fair to early adopt. Assuming a
December year end, the first year end that will be impacted by IFRS 15 will be December 2015 if adopted January 2015. Therefore, entities will have sufficient time to adopt IFRS 15.
Additionally, when entities prepare the financial statements for the 2014 year end, this will not have to be restated when they adopt IFRS 15 in 2015. Cost consideration is irrelevant as regardless of the effective date the cost is unavoidable. The only difference is that the cost is delayed to year end 2017 rather than incurring the cost in 2015 but it does not justify that the effective date should not be amended.
Quiet period
There are no new Standards, major amendments to Standards and new Interpretations that are effective in 2015. Adopting IFRS 15 in 2015 will not be a burden for companies.
CONCLUDING REMARKS
IFRS 15 - a better model for revenue recognition
•
IFRS 15 addresses those deficiencies by specifying a comprehensive and robust framework for the recognition, measurement and disclosure of revenue. In particular, IFRS 15:
• improves the comparability of revenue from contracts with customers;
• reduces the need for interpretive guidance to be developed on a case-by-case basis to address emerging revenue recognition issues; and
• provides more useful information through improved disclosure requirements.
FRC
Fax: 213 6900
E.mail: frc.mauritius@intnet.mu