Michael Simms
Michael Simms writes: With the introduction of a new accounting standard, how to incorporate the changes that arise from its initial application may give rise to issues which can be very challenging. This is something that shipping companies will have to consider. This can involve:
- technical problems, arising from the application of a new standard to previous transactions;
- practical challenges in being able to identify which transactions and balances the standard will apply to and obtaining the information needed to actually determine the effect of any change; and
- existing bookkeeping systems and processes might simply not be set up to obtain the information needed.
In recognition of this, new accounting standards often have transition exemptions that attempt to strike a balance between the pure application of a change and the cost of making any change with the benefit from the improved standard. IFRS 15 is no different in this respect.
Two methods are available for the initial application of IFRS 15:
- retrospective, with some limited expedients’, or
- cumulative catch-up.
An understanding now of the effect of IFRS 15 and the different impact of the two transition methods should be examined to determine which may be preferred. Management of the process will be easier when you are in control: plan – compute – compare – choose.
Details of both methods are explained in our factsheet and are available to download here.
You can read our other articles from the IFRS 15 series through the links below:
How will shipping revenues be affected by new accounting requirements?
Presentation and disclosure issues in shipping
To discuss any of the topics raised in this article in more detail, please contact a member of the shipping team.
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