Why revenue recognition matters even for German SMEs? Richard Martin Berlin, April 2017

Transcription

1 Why revenue recognition matters even for German SMEs? Richard Martin Berlin, April 2017

2 ACCA Global body for professional accountants 188,000 members and 480,000 students In 178 countries served by 100 offices and centres IFRS in the professional qualification since 1996 Diploma and Certificate in IFRS 2

3 Revenue recognition why it matters for German SMEs IFRS15 new model for revenue recognition Link between IFRS and accounting by SMEs Implications for German SMEs 3

4 New model for revenue recognition

5 Revenue recognition and IFRS15 Measuring revenue is central to organisations Most significant number for many margins Top line for taxation New standard may delay or quicken revenue recognition Much more prescriptive guidance than in IAS18 or IAS11 5

6 IFRS15 revenue from contracts with customers 5 step approach to revenue recognition identify the contract with a customer identify the separate performance obligations in the contract determine the contract price allocate the transaction price to the separate performance obligations recognise revenue when a performance obligation is satisfied.i 6

7 IFRS15 revenue from contracts with customers Identify contract when modifications mean new contract Separate performance obligations Distinct good or services More emphasis on unbundling Greater clarity on warranties 7

8 IFRS15 revenue from contracts with customers Contract price variable consideration financing component Allocation to performance obligations based on stand alone selling prices variable consideration 8

9 IFRS15 revenue from contracts with customers Satisfaction of performance obligations transfer of control Repurchase arrangements Satisfied over time Satisfied at a point in time Where percentage of completion method used 9

10 Impact of IFRS15 some indicators Do you combine an initial sale with subsequent services? Do you make products for specific customers? Do you do provide products or services that need a long time to construct or develop? Do you have contingent income bonuses based on targets, discounts? Do you have licence or royalty income? Do you have many contract modifications? 10

11 Do IFRS trickle down to SMEs? 11 01/05/2017 Title of presentation - enter in the Header & Footer field

12 Link between IFRS and SME accounting in Europe Study by EFAA European Federation of Accountants and Auditors for SMEs Is there a trickle down effect? Evidence and extent Implications for IASB, EFRAG, Commission and national standard setters 12

13 EFAA Trickle down study Five countries: Germany, Netherlands, Portugal, Spain and UK Micro, small and medium-sized requirements 96 accounting treatments recognition and measurement, not disclosures The treatment required of SMEs different from IFRS red If the same, this was as a response to IFRS green If the same, but existing treatment before IFRS white 13

14 Convergence of SME accounting and IFRS Convergence green plus white Germany 57% Netherlands 57% Portugal 67% Spain 67% UK 72% Mostly by trickle down 14

15 Other overall effects seen The larger the entity the more likely that requirements converged with IFRS Micro 57% Small 63% Medium sized 72% Step changes or more gradual process 15

16 Why trickle down? Or why not? Where the directive is silent Alignment of SME accounting with that for listed companies Not for more recent standards More complex treatments Fair value and prudence Tax treatments Legal restrictions Options more or less for SMEs 16

17 Results for Germany Relatively less white Major alignment in 2009 Very little difference in recognition and measurement between micro, small and medium Fair value requirements generally not adopted IFRS9 rather than IAS39 Leasing on a tax basis IAS18 revenue generally consistent IAS11 percentage of completion method not adopted 17

18 Implications for German SMEs

19 Revenue recognition and German SMEs IFRS15 is not a complete change Important differences from current treatment Unbundling of performance obligations Financing element Variable or contingent consideration Delivery over time or at a point in time Percentage of completion method 19

20 Revenue recognition and German SMEs Elements of IFRS15 may trickle down to SMEs Considerable evidence from the past But tax considerations have been significant in that process Leasing Will IFRS16 trickle down to SMEs? 20

21 Common corporate tax base (CCTB) Draft EU directive being considered Would apply to groups above a certain size and their subsidiaries Would be optional for others Contains rules for the determination of taxable profit Including R&D allowances Restrictions on interest deduction But also revenue and cost recognition 21

22 CCTB some implications Article 16 revenue recognition right to receive revenues has arisen when individual instalment becomes due Article 17 expense recognition the obligation to make the payment has arisen Article 22 Long-term contracts % of completion on a ratio of costs incurred 22

23 RM1 Questions or comments?

24 Slide 23 RM1 Richard Martin, 12/12/2015

25 Thank you Richard Martin accaglobal.com