Recognition and Measuring of Revenue: An Examination of IFRS 15

Frederik Sandvad Myralf

Student thesis: Master thesis


The main objective of this thesis is to examine the major differences between IFRS 15 and thepresent revenue accounting standards under IFRS and asses which influence IFRS 15 will haveon the recognition of revenue in telecommunication companies.In order to do this, a theoretical examination of IFRS 15 and the present accounting standards(IAS 18 and IAS 11) will be made. The understanding of both IFRS 15 and the present revenuerecognition standards, and the differences between these, will be used to assess the influence ofIFRS 15 on revenue recognition in the telecommunications industry.The examination of the present revenue standards revealed that criticism has been raised on thepresent accounting standards because of inconsistencies in these compared to the principles ofthe Conceptual Framework for Financial Reporting. There are also inconsistency betweentransfer of risk and rewards as the critical event for recognition of revenue according to IAS 18and 11 and the definition of an asset in the Conceptual Framework in which control is the criticalevent.The analysis revealed that IFRS 15 has some potential significant differences compared topresent standards. This is especially on areas in which the present standards only contain limitedguidance. The lack of guidance has forced companies to search in different accounting standardsto interpret and develop their accounting policies. This is especially the case in identification ofseparate elements in contracts with multiple elements and allocation of the transaction price tothese separate elements. Also differences arise in contracts with a variable transaction price andwhen modifications to contracts are made. IFRS 15 contains a lot more specific guidance onthese areas which may cause new and different requirements that companies have to take intoaccount.IFRS 15 will for some areas cause a significant change in the revenue recognition fortelecommunication companies. The change means that telecommunications companies willallocate more revenue to the handset in a bundled package solution. This will lead to earlierrevenue recognition and a change in the revenue streams from network services and mobilephones. The changes lead to a fall in the average revenue per user for network services. Thechange in allocation method will also lead to recognition of a contract asset in the balance sheet.Because of these changes IFRS 15 will provide different information on the telecommunicationcompanies’ performance

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages83