# IFRS 15: En matematisk analyse af omsætning fra kontrakter behandlet efter IFRS 15 og de standarder den erstatter

Peter Schow Jensen

Student thesis: Master thesis

## Abstract

The purpose of this thesis is to construct a comprehensive mathematical model that describes revenue recognized under IFRS 15 across various industries with large contract variations. Further the model is used to analyze the overall changes in revenue recognition that occurs after the introduction of IFRS 15 in relation to the standards it replaces. IFRS 15 Revenue from Contracts with Customers are going to change how firms are supposed to detect revenue per accounting period, their revenue recognition process. One of the most the most recited critiques of IFRS 15 is that it is impossible to make a good specific revenue standard based on contracts that works across all industries, industries with huge contract differences. The thesis counters the critique by constructing a comprehensive mathematical model that proves that the fundamental mathematical aspect of IFRS 15 is quite simple and the same across all industries. The thesis further states the point that a comprehensive mathematical interpretation of IFRS 15 is closer to the real world than classical simple examples because it shows how accounting software, or a company made Excel model, would calculate and recognize revenue under the rules of IFRS 15. The thesis then compares the mathematical interpretation of IFRS 15 with a mathematical model of IAS 11 and IAS 18 built on the same principles to analyze the overall changes in revenue recognition that will occur after the introduction of IFRS 15 in relation to the standards it replaces. The analysis of the different standards reveals that there are four common key contract factors that IFRS 15 potentially account for differently than IAS 11 and IAS 18. All four factors boost each other’s potential effect on revenue recognition when moving from IAS 11 or 18 to IFRS 15. The four key contract factors are the complexity of the contract, the length of the contract, the discount in the contract as well as variable consideration present in the contract. The more a company or an industry uses complex long contracts with discount and variable consideration the bigger effect IFRS 15 will have on their revenue recognition. Opposite, IFRS 15 is not going to have a notable effect on companies or industries that sell simple products in short contracts. The different potential effect could be the reason why the telecommunication and software industry with complex contracts have been way more critical of IFRS 15 than the retail industry which sells products with simple often unwritten contracts.

Educations MSc in Auditing, (Graduate Programme) Final Thesis Danish 2016 85