Previously, given the lack of specific guidance in IFRSs, there was greater room for judgment when
identifying the goods and services within a contract and then allocating the revenue to those goods and
services identified. Entities may have to amend their current accounting policies as a result of the more
detailed guidance in IFRS 15. The new standard requires the revenue from a contract to be allocated to
each distinct good or service provided on a relative standalone selling price basis, though a ‘residual’
approach is permitted in limited circumstances.
This may significantly change the profile of revenue recognition for some entities where, for example, they
offer a ‘free’ maintenance period to customers as part of a transaction. Where entities have a large number
of customers with different options, there may be some significant practical challenges to overcome in order
to ensure systems are in place to deal with the new requirements.