Abstract
In May 2014, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued long-awaited converged standard on revenue recognition, IFRS 15 and ASU 2014-09 (Topic 606) Revenue from Contracts with Customers, that sets out the principles for when revenue should be recognized and how it should be measured, together with related disclosures and will replace the all current revenue standards in IFRS and US.GAAP. Although the actual implementation is still in the future, now is the time for all preparers, auditors and users of financial statement to understanding of the new recognition and disclosure requirements and prepare to implement them, because the new provisions of IFRS 15 will impact in all entities in all industries, but the extent of the impact can vary significantly. This paper test the perception of Egyptian preparers and auditors on IFRS 15, we focus on the level of familiarity, standard clarity and ease of application across different business sectors in Egypt. The final sample of the study consisted of 31 auditors and 34 preparers (which consist of chief accountants, account executives and etc.), a majority of the participants (88.3%) were from local accounting firms or Listed companies operating in various business sectors. Both the auditors and preparers are experienced accountants with mean years of experience of 7.6 and 8.56 years respectively. We find that generally Egyptian accountants and auditors surveyed are still not ready to adopt and did not have sufficient knowledge about IFRS15, as well as, they afraid of the new revenue recognition requirement (which increased discretion and professional judgment in revenue recognition) and its potential impact on different industries.
Highlights
It is considered to be one of the top accounting and auditing areas of risk and one of the most significant causes of material weakness in internal control, because revenue recognition requirements in the US.GAAP differ from the IFRS revenue recognition principles, and both sets of requirements are considered for improvement. (Bohusova and Nerudova, 2009)
One potential explanation for the findings might be attributed to the reason that IFRS 15 is a principles-based standard that would require the greater use of professional judgment in assessing a entity’s performance obligations and when these obligations are satisfied etc and the standard is not easy to be applied across different business sectors, as well as the participants unfamiliarity with the standard
Results of the study revealed that Egyptian accountants and auditors are still not ready to adopt IFRS15 and they perceived that the standard is not easy to be applied across different business sectors
Summary
Revenue is among the largest and most valuerelevant items in firms’ financial Statements (Srivastava, 2013), because Revenue usually is the largest single recurring item in financial statements and one of the most important information that have a value relevance to all users of financial statements to evaluate the entity's ability to achieve future earnings and cash flows and to identify future prospects. (Schipper et al, 2009) Despite of Revenue is an important measure of an entity’s performance, which used widely by investors and other users for making comparisons and investment decisions. (Ciesielski and Weirich, 2011), Issues involving revenue recognition are among the most difficult that standard setters and accountants deal with regularly, because when there are problems in a entity’s financial statements, investors are more concerned about revenue recognition problems than any other reporting issue. (Colson et al, 2010).Revenue recognition is an important topic because it is one to the most important and complex challenges facing companies. Revenue recognition under US.GAAP requires revenue to be earned and realized or realizable before it can be recognized. While this concept seems straightforward, it is not applied consistently across different industries. Despite the number of industry specific standards, there are still gaps in the guidance and there are not specified standards for all types of businesses and situations and little guidance is provided for service activities, the fastest growing part of the U.S economy On other hand, international standards (IFRS) generally provide less guidance on revenue recognition and those standards can be difficult to understand and apply to other than simple transactions. The disclosure requirements in U.S GAAP and IFRS often result in information that is inadequate for users to understand a company’s revenues. The disclosure requirements in U.S GAAP and IFRS often result in information that is inadequate for users to understand a company’s revenues. (Fisher, 2014, J.Gallistel et al, 2012)
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