Is your business prepared for IFRS 15?
In his speech at the EY-sponsored Financial Reporting Outlook conference in November 2014, Ian Mackintosh, IASB vice-chairman praised the IFRS model for revolutionising the financial reporting landscape. He stated that IFRS has allowed for a "globally consistent language of financial reporting". Mackintosh also announced that thanks to IFRS, "accounting is on the cusp of becoming the world's first global profession".
The announcement of the introduction of IFRS 15 marks the beginning of the end of almost a decade of continuous transformation in financial reporting. As of 1st January 2017, the way companies recognise revenue is changing. The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) have issued their joint revenue recognition standard, IFRS 15: Revenue from Contracts with Customers. Taking more than a decade of research and planning, the new standard replaces all existing IFRS and US GAAP revenue recognition.
In its simplest terms, IFRS 15 will align revenue reporting with the US reporting standard, US GAAP. The new standard eliminates global differences and conflicting requirements in recognising revenue making it much easier to compare reported revenues across countries, industries and capital markets. Revenue is an extremely important figure to shareholders and investors and other users of financial statements seeking to understand a company's performance and prospects.
A similar change previously introduced was Sarbannes-Oxley (SOX) in 2002. When SOX was first launched, Cedar experienced an overwhelming increase in the number of senior financial hires across commerce and industry sectors to manage the transition and impact effectively. Interim managers were in high demand to implement new processes in order to be compliant. As a result, daily rates soared and experienced SOX professionals' commanded an extra £100-200 on top of their standard interim daily rate.
Although IFRS 15 is not anticipated to have the same impact as the introduction of SOX, complying to new IFRS 15 standards will be a considerable challenge to many businesses. Businesses that offer complex 'bundles' of goods and services such as Telecoms and technology businesses will feel the pressure of IFRS 15 even more. With IFRS 15 replacing all current reporting standards and with all companies having to be compliant before January 2017, Cedar anticipates a surge in recruitment as companies bolster their finance teams to implement the change process and manage new processes.
According to EY, "early preparation will be key to a successful implementation of the new standard". Are you prepared for the change?
In order to gain insight into the impact IFRS 15 will have on UK businesses, Cedar embarked on an industry research project in partnership with GAAPweb. Together, we conducted a survey of finance leaders across FTSE 250 organisations through to private-equity backed businesses and privately owned SME's to garnering their thoughts on the new accounting standard.