The International Accounting Standards Board (IASB) has recently notified new accounting standards IFRS 15 – Revenue from Contracts with Customers and IFRS 16 – Leases, mandatorily applicable from 1 January 2018 and 1 January 2019 respectively.
Corresponding standards have also been issued under Ind AS and US GAAP. These standards represent the culmination of years of research and deliberation between IASB and FASB.
Ind AS 115/ IFRS 15
Ind AS 115/IFRS 15 will apply to most revenue arrangements, including construction contracts. Among other things, it changes the criteria for determining whether revenue is recognised at a point in time or over time and provides more guidance in areas where current IFRSs are lacking – such as multiple element arrangements, variable pricing, rights of return, warranties and licensing. The actual impact on each company’s top line will depend on the industry, specific customer contracts and how they have applied existing standards.
Ind AS 116/ IFRS 16
Ind AS 116/IFRS 16 represents the first major overhaul of lease accounting in over three decades. The IASB has long considered the existing split between operating and finance leases as problematic as it has resulted in too much structuring and off-balance sheet financing. Therefore, Ind AS 116/ IFRS 16 has done away with this distinction, requiring the accounting of all leases to be ‘on-balance sheet’ for lessees.