First time adoption of IFRS 15 ― Revenue from contracts with customers

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • First time adoption of IFRS 15 ― Revenue from contracts with customers
  • Introduction
  • Implementation rules
  • Core rules
  • Taxation impact
  • Modified retrospective adoption
  • Full retrospective adoption
  • Commercial impact


The adoption of new accounting standards commonly results in transitional tax adjustments for corporation tax purposes. This happens because the cumulative amount of income or expense recognised on the new basis as at the start of the year of adoption usually differs from the old basis.

In addition, there are usually deferred tax implications at the point of transition as a consequence of ‘catch-up’ adjustments taken to reserves on adoption of the new standard. Where the income of the comparative period is altered, then a deferred tax adjustment to that period is usually required although corporation tax for that year will remain undisturbed assuming based on the valid GAAP rules of that previous period. If the tax rules going forward mirror the accounting entries, then there will be no deferred tax balances at the end of the year of adoption of the new standard.

This guidance note explores these issues in the context of IFRS 15.

The introduction of IFRS 15, an entirely new accounting standard, provides a comprehensive source of guidance on revenue recognition for all IFRS users. Previous guidance was limited to a fairly narrow range of situations and allowed users to interpret GAAP with varying degrees of conservatism, resulting in a range of different accounting outcomes. IFRS 15 should narrow this historic diversity by providing a combination of clear principles and detailed guidance on its application.

The standard will have a pronounced effect in certain industries such as telecommunications, construction, software providers and providers of public services and infrastructure, but less impact perhaps in insurance, banking and other financial services.

IFRS 15 replaces all of the following standards and interpretations:

  • IAS 11 ― Construction contracts
  • IAS 18 ― Revenue
  • IFRIC 13 ― Customer

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