What could users expect to see in the financial statements for revenue with performance obligations?

What could users expect to see in the financial statements for revenue with performance obligations?

The International Public Sector Accounting Standards Board (IPSASB) issued three Exposure Drafts for comment in February 2020, being Revenue with Performance Obligations (ED 70), Revenue without Performance Obligations (ED 71) and Transfer expenses (ED 72). In previous articles we explored what the implications of the proposed scope, recognition and measurement requirements may be. We will now consider the proposed presentation and disclosure requirements.

What was the IPSASB’s approach in determining appropriate disclosure requirements?

ED 70 was issued to replace the existing IPSASs on Revenue from Exchange Transactions (IPSAS 9) and Construction Contracts (IPSAS 11). ED 70 is based on the private sector revenue standard, IFRS 15 on Revenue from Contracts with Customers, which replaced IAS 18 on Revenue and IAS 11 on Construction Contracts. This changed the revenue recognition approach so that transactions are no longer distinguished as “exchange” or “non-exchange”, but rather as transactions “with performance obligations” or “without performance obligations”.

The IPSASB decided that ED 70 should include the disclosure requirements of IFRS 15, although there are more requirements compared to existing revenue standards.

The Secretariat of the ASB has prepared a summary of the disclosures, which maps differences between the existing and proposed disclosures. The summary can be accessed by following this link: https://bit.ly/322WuLc

What are the potential implications of the proposed requirements?

Although it is expected that the presentation and disclosure requirements in ED 70 would differ from current requirements, as a result of the new approach to account for revenue transactions, the question to constituents is whether the proposed requirements are too onerous, just right, or not enough. This is a question we will explore further locally in upcoming roundtable discussions.

Where can the EDs be accessed and how can you provide comment?

The EDs have been published on the ASB’s website and can be accessed here: https://www.asb.co.za/comment-on-proposals/. The EDs are as follows:

• ED 181 on IPSASB Exposure Draft on Revenue with Performance Obligations (ED 70)
• ED 182 on IPSASB Exposure Draft on Revenue without Performance Obligations (ED 71)
• ED 183 on IPSASB Exposure Draft on Transfer Expenses (ED 72)

Comment can be submitted to the Secretariat of the ASB at info@asb.co.za or via the website.