In May 2014, the AASB issued AASB 15: Revenue from Contracts with Customers. The new standard is applicable for periods beginning on or after 1 January 2018, and replaces AASB 111 Construction Contracts and AASB 118 Revenue and related interpretations.
The new standard was the result of the standard setters’ objective of harmonizing IFRS and US GAAP requirements for revenue recognition into a single principles-based standard, and also reflected the need to replace the existing standards, which were over 20 years old, and contained little practical guidance. It sets out a comprehensive five-step approach to recognition of revenue:
- identify the contract(s) with a customer
- identify the performance obligations in the contract
- determine the transaction price
- allocate the transaction price to the performance obligations in the contract
- recognise revenue when (or as) the entity satisfies a performance obligation