IFRS 15 vs. IFRS 9

Attribute	IFRS 15	IFRS 9
Scope	Revenue recognition	Financial instruments
Effective date	January 1, 2018	January 1, 2018
Objective	Recognize revenue in a way that reflects the transfer of goods or services to customers	Provide principles for the classification, measurement, and impairment of financial assets and liabilities
Measurement	Based on the consideration expected to be received in exchange for goods or services	Based on amortized cost, fair value through other comprehensive income, or fair value through profit or loss
Impairment	Recognize impairment losses on receivables and contract assets	Recognize impairment losses on financial assets

Overview

IFRS 15 and IFRS 9 are two important accounting standards issued by the International Accounting Standards Board (IASB). IFRS 15, Revenue from Contracts with Customers, provides guidance on how to recognize revenue from customer contracts. On the other hand, IFRS 9, Financial Instruments, deals with the classification, measurement, and recognition of financial assets and liabilities.

Scope

IFRS 15 applies to all revenue arising from contracts with customers, unless the contract is within the scope of another standard. It is applicable to all industries and sectors. In contrast, IFRS 9 applies to all types of financial instruments, including derivatives, equity instruments, and debt instruments. It is relevant for entities that hold financial assets or liabilities.

Recognition and Measurement

IFRS 15 introduces a five-step model for recognizing revenue: identify the contract, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations, and recognize revenue as the performance obligations are satisfied. This model aims to provide a more consistent and comprehensive approach to revenue recognition. On the other hand, IFRS 9 introduces a new classification and measurement approach for financial assets, with three categories: amortized cost, fair value through other comprehensive income, and fair value through profit or loss.

Impairment

One key difference between IFRS 15 and IFRS 9 is the treatment of impairment. IFRS 15 does not specifically address impairment of receivables or contract assets. Instead, it requires entities to assess the collectability of the contract asset and recognize an impairment loss if necessary. In contrast, IFRS 9 includes an expected credit loss model that requires entities to recognize impairment losses on financial assets based on expected credit losses over the life of the asset.

Hedge Accounting

IFRS 9 introduces a more principles-based approach to hedge accounting compared to the previous standard, IAS 39. It allows entities to better reflect their risk management activities in the financial statements. Under IFRS 9, hedge accounting is aligned with an entity's risk management objectives and strategy. On the other hand, IFRS 15 does not address hedge accounting as it focuses on revenue recognition from customer contracts.

Disclosure Requirements

Both IFRS 15 and IFRS 9 have extensive disclosure requirements to provide users of financial statements with relevant information. IFRS 15 requires entities to disclose information about revenue recognized, contract balances, performance obligations, and significant judgments and estimates. Similarly, IFRS 9 requires entities to disclose information about the classification and measurement of financial instruments, impairment losses, and hedge accounting activities.

Implementation Challenges

Implementing IFRS 15 and IFRS 9 can pose challenges for entities due to the complexity of the standards and the need for significant changes to existing accounting practices. Entities may need to invest in training and systems upgrades to ensure compliance with the new requirements. Additionally, the transition to the new standards may require entities to make significant judgments and estimates, which could impact financial reporting.

Conclusion

IFRS 15 and IFRS 9 are important accounting standards that address revenue recognition and financial instruments, respectively. While IFRS 15 focuses on revenue recognition from customer contracts using a five-step model, IFRS 9 deals with the classification, measurement, and impairment of financial instruments. Both standards have extensive disclosure requirements and may pose implementation challenges for entities. It is essential for entities to understand the differences between IFRS 15 and IFRS 9 to ensure compliance and provide users of financial statements with relevant information.