Revised Accounting Standard for Revenue from Contracts with Customers – Regulation Impact Statement – Australian Accounting Standards Board

23 January 2015

On 23 December 2014, the Australian Accounting Standards Board (AASB) announced it had approved a new standard, AASB 15 Revenue from Contracts with Customers, that addresses the financial reporting of revenue and cash flows arising from an entity’s contracts with customers. The new standard establishes principles, and includes disclosure requirements, for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, based on the international financial reporting standard IFRS 15 Revenue from Contracts with Customers. IFRS 15 addressed concerns by users of financial statements that existing revenue standards have led to inconsistencies between entities’ reported revenues, principally in relation to when an entity recognises revenue under some long term contracts (e.g. some construction contracts) and contracts that bundle together goods and services (e.g. contracts that bundle a telephone handset with network services). By incorporating the requirements of IFRS 15 into AASB 15, the new Australian standard addresses these issues as they apply to Australia and ensures that financial statements prepared by Australian entities in accordance with Australian accounting standards will remain compliant with international financial reporting standards. The costs incurred to comply with the new standard are expected to be primarily one-off implementation costs and, to a lesser extent, some ongoing preparation costs for some industries, with the most significant costs for entities that operate in the software and telecommunications services industries. The proposal has been assessed as likely to have a measurable but contained impact on the economy with no impacts on competition. A Regulation Impact Statement (RIS) was prepared and certified by the AASB, and has been assessed as compliant by the Office of Best Practice Regulation (OBPR). In addition, the OBPR advises that the process followed by the AASB and the level of analysis contained in the RIS was consistent with best practice. The RIS estimates the average annual regulatory cost at $15.1 million per annum, and identifies offsets. The OBPR has agreed to the regulatory cost and offset estimates.