With virtually every industry set to be affected, companies should be doing more to prepare for new rules on how revenue is recognised, according to accounting firm RSM Australia (RSM).
The changes are a result of a new accounting standard, AASB 15, issued by the Australian Accounting Standards Board. The new standard requires companies to take a fresh look at their approach to revenue recognition, by linking it to the “performance obligations” that they fulfil for their customers.
The changes don’t take effect until 1 January 2018, but RSM’s National Technical Director, Ralph Martin, warned that there wasn’t as much time as many companies thought to prepare for the upcoming changes.
“When the new standard was issued, the construction sector, and other industries involved in long term contracts immediately realised the potential impact, and began to take action. However, the effect of the new standard is far wider than that.”
“There has been an undue sense of complacency in some sectors, based on the perception that nothing has really changed” Martin warned.
“Our analysis suggests that almost every industry will be affected by this change to some extent. We have identified changes that will affect retailers, manufacturers, service providers, membership organisations, and hospitality services, among others.”
Martin cautioned that while 2018 may still seem some time away, contracts that companies are signing with their customers right now will be caught under this new standard. How the contract is worded can have a material effect on the accounting treatment.