Revenue and financial instruments. These two new major standards will become mandatory starting on January 1, 2018. The final countdown has begun.

While most Groups have anticipated potential changes in how to account for client contracts and financial instruments, it’s also important to study the new information required in appendices. While they are often an afterthought, these appendices deserve your attention because they often require significant changes to reporting practices and information systems.

For IFRS 15, a common difficulty is tracking changes to assets and liabilities in contracts with clients and reporting reliable revenue information that will be reported in later fiscal years as goods and services still to be provided to clients (“substitute” in the order book). Basically, other than for assets related to currently active projects, the standard requires an indication (quantitative or qualitative) of the periods during which revenue will be generated (for example, a repayment schedule). This leads to the conclusion that more detailed repayment schedules will require Groups to note the gaps between actually observed revenue and the scheduled revenue for each period.

As for financial instruments, it seems clear that the information to be provided about credit risks is mainly there fore financial institutions. The IASB has always refused to issue sector-based standards, so industrial and commercial firms will have to adapt how much information they provide about credit risks based on how important they are and their materiality in the consolidated accounts. In this context, we encourage you to review the IASB’s new guide on applying the principle of materiality (IFRS Practice Statement: Making Materiality Judgements). Finally, we encourage you to take a very close look at the new information requirements for hedge accounting (the standard calls for detailed information about coverages’ estimated impacts).

In the mean time, please contact our IFRS teams with any questions you may have about implementing these two standards.