Question

Part B (1700 words) The Australian Securities and Investment Commission (ASIC 2014) announced that one of its areas of focus on financial reports of listed entities and other entities of public interest was accounting policy choices. According to ASIC (2014), preparers and auditors need to focus on the appropriateness of key accounting policy choices and that its surveillance will focus on material disclosures of key accounting policy choices. These include off- balance sheet arrangements, revenue recognition, and expensing of costs. "AASB 15 Revenue from Contracts with Customers, replaces existing accounting guidance and introduces a comprehensive revenue recognition model aimed at enhancing comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets." "ASIC has warned companies that AASB 15, together with AASB 16, Leases, and AASB 9, Financial Instruments, represent the most significant change to financial reporting since IFRS adoption in 2005." (Source: Bhattacharya, S. 2017. New revenue standard - Introducing AASB 15. April. KPMG.) The quotes above from Bhattacharya, (2017) suggest that AASB 15 will have wide-ranging implications on all types of entities in various industries. REQUIRED In your report, please explain the revenue recognition criteria in AASB 15 / IFRS 15 Revenue from Contracts with Customers and discuss the choices of accounting policies in AASB 15 / IFRS 15 Revenue from Contracts with Customers by reference to the relevant accounting research literature on factors influencing firms' accounting policy choice (e.g. Positive Accounting Theory). Please review the existing literature when preparing your report, Note: To write this report, you must read widely. There are many academic and professional articles written which you must use to support your arguments. Do not provide your opinions, instead provide evidence justify what you are saying.

can i get the introduction and conclusion with references thanks

Answer 1

Accounting Standard AASB 15

Revenue Form Contracts with Customer

The objective of this Standard is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer.

The core principle of this Standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Revenue means Income from ordinary activities of entity. The ordinary activities may be intentional or unintentional.

Contract means agreements which are enforceable in nature, for supply of goods and services to customers aganist consideration.

Customer is counter party, which agrees to acquire goods and services (without particiapting in risk) aganist consideration.

Revenue Recognition is now a 5 Step Model

1) Identify valid enforceable contract.

2) Identify Performance obligatuion in such contract.

3) Identify Transaction price in contract.

4) Allocate Transaction price in each performance obligation.

5) Recognise Revenue when goods and services are tranferred.

The implications of AASB 15 can be pervasive, but the new revenue standard may also present opportunities. In our experience, the true magnitude of the standard’s impact emerges only after a company commences its

implementation. Organisations will need to consider impacts which include, but are not limited to, the following:

• timing of recognition and amount of revenue recognised may change
• changes to systems, processes and controls may be required
• extensive new disclosures will be required
• KPIs and ratios may be affected, which could impact share price and access to capital
• investors will require education on the change in revenue profile.

Among industries most impacted are telecommunications, construction and engineering, and software development.

Purpose

This study aims to examine the implementation of AASB 15 Revenue from Contracts with Customers to provide insight into preparers’ perspectives on the challenges, costs and benefits experienced in implementing a new and complex standard.

Design/methodology/approach

The study uses a survey of 143 financial statement preparers engaged in implementing AASB 15.

Findings

The results reveal significant variation in the approach to, and progress in, implementing AASB 15.

Research limitations/implications

The study provides evidence of the role of proprietary costs in implementing a new standard and suggests that preparers adopt a more pragmatic view of the nature of compliance compared to standard-setters.

Practical implications

The evidence in this study strongly suggests that there is little to be gained in deferring effective dates for new standards. It suggests that standard-setters can motivate entities by framing a standard in terms of how it improves the business itself, rather than from a compliance framing.

Originality/value

This study provides a rare perspective on the actual implementation experience of preparers confronted with the introduction of a new standard. Such a perspective is of value to standard-setters and preparers and offers insight to researchers that cannot be gained from traditional capital market archival approaches.