IFRS 15 Update: Revenue from Contracts with Customers
IFRS is the prevailing financial reporting standards in the Middle East, and we as accountants have to be up-to-date with the recent updates to the standards. IMA Dubai-UAE Chapter invited a guru of IFRS – Yusuf Hassan, a Partner of KPMG and Director of KPMG academy to explain on the coming changes in IFRS and their impact on the accounting in various industries.
The question “why accountants made the accounting so complicated?” was answered by Yusuf so diligently and precisely that “it is not us, accountants, who make the accounting complicated, but the whole business transactions that needs to be properly accounted for got complicated”. In airline business “free miles that can earn a passenger a free ticket a year”, or the retail promotions like – “buy two and get 1 free”, or gift vouchers with certain expiry dates - all these types of transactions were not known before, that is why the accounting transactions in the past were very straightforward. Nowadays, with all these complications the accountants need to have the solutions on how to account for these transactions in order to show the revenue correctly. And Mr. Hassan gave an excellent presentation on how these transactions treatment should be done in accounting and what improvements were made to the existing revenue standard, what industries will be impacted the most and what should they do to help them get through this transition smoothly.
Lease standard update was also covered in this session, as the confusion between accounting treatment of the operational and financial lease was a cumber-stone for many years for all accountants because operating lease was actually an off-balance sheet liability. The new IFRS16 addressed this issue and now all leases are considered as financial lease, and the accounting treatment mainly affects the lessee part, where the lessee now has to record the liability for the full term of the lease and show it on the assets side of balance sheet as “the right to use of the underlying asset”. Thus all operating lease expenses will now be under new standard the depreciation expenses and interest expenses.
These complicated topics were explained in such an easy to understand manner, all participants gave an outstanding feedback to the speaker, the slides as well as the delivery manner and the level of expertise of the speaker were highly evaluated by the audience. That event was a very productive team work of KPMG and IMA Dubai-UAE Chapter and gave a good start for the long term collaboration in the future.