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While we found that the five-step revenue recognition model promotes consistency in revenue recognition, the application of IFRS 15 involves significant estimates and judgement. This leads to challenges in areas such as determining performance obligations, transaction price, principal vs agent and interactions with other IFRSs. We urge IASB to address these practical challenges through provision of application materials.
While IFRS 15 and US GAAP Topic 606 were initially aligned, subsequent amendments have led to divergence between both standards. Given the importance of the revenue figure as a financial metric, we encourage the IASB to work closely with the FASB to align both standards.
We also suggest that the IASB (i) provide practical expedients for short-term service contracts and (ii) introduce the 'predominant' concept in determining the appropriate accounting standard to be applied to a transaction.
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