What’s the Impact of the IFRS 15?
The biggest impact of the new standard is that the companies will report profits in a different way and profit reporting patterns will change.
In our telecom example, ABC reported loss in the beginning of the contract and then steady profits under IAS 18, because they recognized the revenue in line with the invoicing to customers.
Under IFRS 15, ABC’s reported profits are the same in total, but their pattern over time is different.
Why does it matter?
Well, because some contracts surpass one accounting period. They are long-term and reporting revenues in incorrect accounting periods might cause wrong taxation, different reporting to stock exchange and other things, too.
Don’t believe me?
Just look at ABC. Let’s say that contract started on 1 July 20X1 and ABC’s financial year-end is 31 December 20X1. Just look how much profits ABC reports from the same contract with Johnny under IAS 18 and IFRS 15 in the year 20X1: