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Accounting Considerations for CFOs: Revenue Recognition

The Grant Thornton International IFRS team has published COVID-19 – Accounting Considerations for CFOs: Five Accounting Considerations Relating to Revenue Recognition.

As a result of COVID-19 pandemic, entities are generally expecting to experience significant declines in revenue and delays in the delivery of goods and services for long-term contracts. These declines in revenue may arise from decreases in volume and changes in variable consideration. It is likely that, as a result of changes in the economic environment, customers will seek to modify contracts. It is also possible that the ability of customers to pay for goods may be called into question prior to delivery occurring.

An entity may choose to transact in this situation notwithstanding the uncertainty. Both trade receivables and contract assets may also be subject to additional credit risk. Finally, onerous contracts may arise as contracts become loss making through either a decrease in variable consideration or an increase in contract costs.

The publication COVID-19 – Accounting Considerations for CFOs: Five Accounting Considerations Relating to Revenue Recognition highlights key aspects of IFRS 15 Revenue from Contracts with Customers that are expected to be particularly relevant during the COVID-19 pandemic.

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