What is the Difference Between IFRS 15 and IAS 18?
🆚 Go to Comparative Table 🆚The main differences between IFRS 15 and IAS 18 are related to the scope, framework, approach, and revenue recognition criteria. Here are the key differences:
- Scope: IAS 18 provides guidance on revenue recognition from the sale of goods, rendering of services, and the use of assets. In contrast, IFRS 15 addresses revenue recognition from contracts with customers across various industries and revenue-generating activities.
- Framework and Approach: IAS 18 follows a more rules-based approach to revenue recognition, while IFRS 15 introduces a principles-based approach with a five-step model for recognizing revenue from contracts.
- Performance Obligations: IAS 18 does not explicitly address the concept of performance obligations, whereas IFRS 15 emphasizes the identification and separate recognition of performance obligations within a contract.
- Timing of Recognition: IAS 18 focuses on the transfer of risks and rewards when recognizing revenue from the sale of goods. IFRS 15, on the other hand, introduces a transfer of control approach, which is more in line with modern business practices.
- Industry-Specific Guidance: IAS 18 has limited guidance on industry-specific issues, while IFRS 15 includes specific guidance for various industries and scenarios, such as warranties, licenses, and contract combinations.
- Overall Complexity: IAS 18 is generally considered simpler and less comprehensive, whereas IFRS 15 is more comprehensive and reflects modern practices but may involve increased complexity due to its principles-based approach.
In summary, IFRS 15 replaces IAS 18 as the guidance for revenue recognition and aims to provide a more unified and principles-based approach across various industries and contracts with customers.
Comparative Table: IFRS 15 vs IAS 18
Here is a table summarizing the key differences between IFRS 15 and IAS 18:
| Feature | IFRS 15 | IAS 18 |
|---|---|---|
| Framework and Approach | Introduces a principles-based approach with a five-step model for recognizing revenue from contracts | Follows a more rules-based approach to revenue recognition |
| Scope | Addresses revenue recognition from contracts with customers across various industries and revenue-generating activities | Focuses on the sale of goods, rendering of services, and the use by others of entity assets yielding interest, royalties, and dividends |
| Performance Obligations | Recognizes revenue as performance obligations are satisfied, allowing for more recognition over time | Does not have explicit guidance on accounting for contract modifications |
| Measurement of Revenue | Measures revenue at the amount the entity expects to be entitled to in exchange for transferring goods or services | Measures revenue at fair value of consideration received or receivable |
| Contract Modifications | Provides guidance on accounting for changes in contracts, including assessing whether they are separate contracts or modifications | Does not have explicit guidance on accounting for contract modifications |
| Warranties | Provides specific guidance on accounting for warranties | No specific guidance on accounting for warranties |
Please note that IFRS 15 replaced IAS 18, as well as other standards and interpretations related to revenue recognition, such as IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs.
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