The three major accounting standards being introduced include AASB 9 Financial Instruments (applies from years commencing 1 January 2018); AASB 15 Revenue from Contracts with Customers (applies from years commencing 1 January 2018); and AASB 16 Leases (applies from years commencing 1 January 2019).
RSM national technical director Ralph Martin believes entities have not quite fully understood the impact the new standards will bring.
“2018 is likely to be the year when companies are finally forced to come to grips with just how significant the three major new standards – revenue, financial instruments, and leases – are going to be,” said Mr Martin.
“While the impact of leases is relatively well understood, there has been a misconception that the financial instruments standard only affects banks, and that the revenue standard will not change much for most entities.
“In fact, the changes to revenue recognition are likely to have widespread impact across multiple industries, and can be highly complex. It’s not just about changing the number in the financial statements – often internal systems and processes need to be updated too.”
Mr Martin’s comments follow ASIC’s recently released focus areas for 31 December 2017 financial reports, calling on accountants and auditors to address the impact of major new accounting standards.
According to the regulator, there is also a requirement to disclose the impact of the standards in notes to current financial reports ahead of the operative dates for the new standards, which may mean quantification of the impacts for the reporting date that coincides with the start of the first comparative period that will be affected in a future financial report.
“New requirements for revenue recognition and financial instrument valuation apply from the year that starts from 31 December 2017,” said ASIC commissioner John Price.
“So far, surprisingly few companies have made disclosures of the impact of these standards. This may indicate that some companies need to give urgent attention to the immediate impact of the standards on systems, processes and their businesses.”