The Institute of Chartered Accountants of Sri Lanka (CASL) published Revenue from contracts with Customers (SLFRS 15) effective as of 1st January 2018. The new standard establishes a comprehensive framework to determine when to recognise revenue and how much revenue to recognise.
Why do you need for a change in the revenue recognition framework?
The new SLFRS 15 provides a single, comprehensive framework for revenue recognition eliminating variations in revenue recognition practices arising from the existence of a series of Standards and Interpretations. In addition to the significant changes in the revenue recognition practices, the new standard also addresses the issues with regards to limited guidance in the previous standard on many important areas.
SLFRS 15 addresses those absences by specifying a comprehensive and robust framework for the recognition, measurement and disclosure of revenue. In particular, SLFRS 15:
- Improves the comparability of revenue from contracts with customers.
- Reduces the need for interpretive guidance to be developed on a case-by-case basis to address emerging revenue recognition issues.
- Provides more useful information through improved disclosure requirements.
SLFRS 15 Revenue from Contracts with Customers applies to all contracts with customers, except for the following:
Lease contracts within the scope of LKAS 17/SLFRS 16 Leases
- Insurance contracts within the scope of SLFRS 4 Insurance Contracts
- Financial instruments and other contractual rights and obligations within the scope of SLFRS 9 Financial Instruments
- Non-monetary exchanges between entities.
SLFRS 15 replaces the following standards and interpretations:
- LKAS 11 Construction contracts
- LKAS 18 Revenue
- IFRIC 13 Customer Loyalty Programmes
- IFRIC 15 Agreements for the Construction of Real Estate
- IFRIC 18 Transfers of Assets from Customers
- SIC-31 Revenue – Barter Transactions Involving Advertising Services
