ACC00713 Company and Financial Reporting - AASB Adoption Impact on Annual Report of IMF BENTHAM LIMITED - Assignment Help

Introduction

The Australian Accounting Standards Board has introduced the new AASB 15 Revenue from Contracts with Customers which applies to businesses and entities for the accounting periods beginning on or after 1 January 2018. It is one of the key elements that have been introduced in the nation’s accounting domain as the new accounting standard changes the financial reporting regime in terms of revenue. The AASB 15 will not only have an impact on business models and customer contracts, but it will also have boundless implications in the business and control process.

In order to get a detailed insight into how the new Australian revenue standard will impact a business, the IMF BENTHAM LIMITED business undertaking has been selected. It is a reputed global litigation funding firm which has an exceptional record of success. It operates in numerous nations including the United States of America, Canada, Hong Kong, and the United Kingdom. Some of the core elements that have been captured in the report include the requirements of revenue recognition as per AASB 15, the measurement of revenue as per the new revenue standard and the implications of adopting the standard on the annual report of the firm for the investors. 

Regulatory framework of financial reporting in Australia 

The Australian Accounting Standards Board has introduced a wide range of standards relating to Revenue from Contracts with Customers (AASB 15), Revenue (AASB 118), Presentation of Financial Statements (AASB 15), Fair Value Measurement (AASB 13) and others. The Australian Accounting Standard AASB 15 Revenue from Contracts with Customers is a vital standard that has significantly altered the financial reporting approach for entities to recognize their revenue. According to the annual report of the IMF BENTHAM LIMITED firm, it was not mandatory to implement AASB 15 standard until 1 July 2018 (Imf.com.au, 2019). But the implementation of the standard has the power to impact the firm’s recognition of revenue and the additional disclosures relating to its revenue. As per AASB 15, it may be disallowed to recognize revenue where certain cases are under appeal due to the more prescriptive requirements within the standard for recognition of revenue. 

Part A

Requirements of revenue recognition according to AASB 15

According to AASB 15, many business entities that operate in the Australian continent need to follow a completely new approach to recognize revenue from contracts with customers under a totally new framework which is in sync with the standard. AASB 15 specifies when and how revenue is recorded, thus requiring business entities to provide their users of the financial statements with adequate information and reporting disclosures (Accru, 2019). 

The 5-step model that has been established by AASB 15 captures the key requirements of revenue recognition as per AASB 15 (Accru, 2019). The core requirements of revenue recognition as per the standard include the identification of contract with customers, the recognition of different performance obligations, the determination of transaction price, the assigning of the transaction price and the ultimate recognition of the revenue when a performance obligation has been satisfied. Business entities need to adopt a transition approach by employing the requisite skills and resources or the implementation process.