Consequences of the Implementation of IFRS 15 Revenue from Contracts with Customers on Accounting Quality

Anna Meyer & Henrikke Hovda Larsen

Student thesis: Master thesis


Revenue is a vital part of companies’ financial reporting both to preparers and users of financial statements. It serves an important role in measuring financial performance and predicting future prospects. In light of this, the process of measuring and recognizing revenue has been a widely discussed topic. It has gained increased attention in the latter years due to scandals involving improper revenue recognition and due to increased globalization of markets, which has called for a harmonization of accounting standards. The two most influential standard-setters, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB), have conducted a project of converging accounting principles and removing inconsistencies and weaknesses of the current revenue recognition standards. IFRS 15 Revenue from Contracts with Customers was the outcome of this project for IFRS. It is to replace the two current standards governing revenue recognition within IFRS, IAS 18 Revenue and IAS 11 Construction Contracts. This study aims to investigate the consequent changes of the shift from IAS 18 and IAS 11 to IFRS 15. These are analyzed from an accounting quality perspective in which accounting quality is defined and based upon the IASB’s Conceptual Framework. A qualitative approach through a multiple-case study was adopted to research the problem, both from the views of preparers and users. The empirical data was collected through interviews and reviews of comment Letters sent to the IASB and FASB during the development process of IFRS 15. The findings show that the implementation of IFRS 15 is expected to result in limited effects on revenue recognition in many industries, and consequently the effect on accounting quality will be limited. However, accounting quality may be positively affected through the increased disclosure requirements prescribed by IFRS 15, which have a potential to increase understandability, verifiability and comparability. The effects are further dependent on the industry in question. The telecom industry will be significantly more affected than other industries, and our findings suggests that accounting quality will be reduced in this particular industry from a user perspective. Furthermore, the study contributes to literature on accounting quality by demonstrating the elusiveness of the concept of accounting quality, which can be viewed and interpreted differently by different stakeholders.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2016
Number of pages126