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Navigating changes to IFRS accounts standards

Requirements of International Financial Reporting Standards (IFRS) seem to change every year and with 17 IFRS accounts standards to stay on top of, keeping up with interpretations and amendments can be a challenge.

For instance, some IFRS accounts standards are not relevant to unlisted entities, others are extremely specific, relating to areas like agriculture and extractive industries and are not applicable to most reporters.

Whichever of the IFRS accounts standards do apply to your business, there are a number of challenges to reporting for IFRS applicable entities.

In this blog we provide a high-level guide to navigating the most recent changes focusing specifically on 9, 15 and 16.

Overview of IFRS accounts standards

According to PwC, IFRS is meant to be applied by “profit-orientated entities’ which provide statements on performance, position and cash flow that is useful to those who make financial decisions such as current and potential investors, lenders and other creditors or even employees, suppliers and customers.

The International Accounting Standards Board (IASB) created a ‘Conceptual Framework for Financial Reporting’ which essentially underlies the concepts of IFRS accounting practices.

Some of the sections of the Framework are:

  • The objective of general purpose financial reporting
  • Financial statements and the reporting entity
  • The elements of financial statements
  • Measurement
  • Presentation and disclosure

Any entity moving from GAAP to IFRS should apply the requirements of IFRS 1, which applies to an entity’s first IFRS financial statements and the interim reports that are part of that period.

There are some exemptions laid out by the IASB for those instances when it deems that retrospective use of IFRS could be too difficult, these exemptions include:

  • Business combinations
  • Deemed cost
  • Designation of previously recognised financial instruments

Complying with the latest IFRS accounts standards


The last few years has seen the introduction of a number of new IFRS accounts standards for entities to comply with, namely IFRS 9, 15 and IFRS 16.

Each new standard comes with its own set of nuances and challenges for those reporting under the standards to comply with.

IFRS 9 – Financial Instruments

IFRS 9 was first applied for periods commencing 1st January 2018. It was aimed mainly towards financial institutions, although it did have a wider impact because of changes around bad debt provisioning.

The standard was introduced as a replacement for IAS 39 Financial Instruments: recognition and measurement and sets out the accounting requirements for financial instruments, including classification and measurement, impairment and hedge accounting.

Among its main changes to reporting was the introduction of a new Expected Credit Loss (ECL) model, which replaced the incurred loan loss model of IAS 39 and required entities to account for future impairments – as well as impairments it had already incurred.

IFRS 9 also changed the way companies classified and measured financial assets and created three categories of measurement:

  • Amortised cost
  • Fair value through other comprehensive income
  • Fair value through profit or loss

The main challenge under IFRS 9 is that it requires companies to assess creditors in a different way than they had previously done and meant the data it needed might not be easily accessible – making the process more labour intensive.

Corporate firms likely find it more difficult because of the issue around assessing the credit risk of companies they are supplying goods to.

Download our IFRS 9 eBook for more information on this reporting standard

IFRS 15 – Revenue from Contracts with Customers

Like IFRS 9, IFRS 15 came into effect for periods commencing 1st January, replacing IAS 18 Revenue and IAS 11 Construction Contracts. It covers how and when to recognise revenue and aims to increase comparability among companies across sectors.

The standard reduces the difficulty for investors to get a true picture of a company from financial statements – as previously, methods for recognising revenue had been so varied and were vulnerable to manipulation.

IFRS 15 introduced a five-step model for determining when revenue should be recognised based on the various phases of a company’s contracts with clients.

The five steps are:

  • Identify the contract or contracts with a customer;
  • Identify the performance obligations within the contract;
  • Determine the transaction price;
  • Allocate the transaction price to performance obligations; and
  • Recognise revenue when or as performance obligations are

By far the biggest challenge of IFRS 15 is calculating when to recognise revenue. It changes the rules relating to when contracts should be combined or modified, royalty and licence payments, non-refundable upfront fees and customer incentives and loyalty programmes.

The standard creates particular difficulties for any firm selling goods that come with an element of service – like a software company providing initial programs as well as ongoing, after sale technical support and updates.

Download our IFRS 15 eBook for more information on dealing with this reporting standard

IFRS 16 - Leases

Coming into force for reporting periods beginning on or after January 1, 2019, IFRS 16 replaced IAS 17 leases and is designed to provide a more faithful representation
of leasing transactions by requiring companies to put most leases onto the balance sheet, providing more accuracy.

For lessees, IFRS 16 creates a number of reporting challenges, particularly:

  • Analysing contracts to work out how much data, and what type, needs to be processed
  • Making new estimates depending on the nature and term of the lease – potential impacting the reliability of financial forecasts
  • Recognition of the lease liability and a right of use asset at the start date, using the value of the lease payment not paid at the start date

Lessors are less impacted  as it only introduced changes for subleases, lease modifications and disclosures.

Using automation to navigate IFRS accounts changes

While changes brought new challenges and requirements, it doesn’t need to become time consuming and labour intensive.

Using automation technology, you can remove the need for manual processes which are heavily reliant on Word and Excel to record and store data and take the hassle out of reporting.

By using accounting software to create specific reporting templates – similar to AccountsAdvanced templates – you can import data from your general ledger system, answer a few basic questions based on the reporting standard you’re using and then let the technology build your set of accounts within the framework you’ve prescribed.

This accounting software can also check that you’ve included all the information that is required within the specific reporting requirement and provide prompts for any missing information to ensure you provide accurate information and don’t unwittingly fall foul of any rules.

For more information on dealing with the challenges of IFRS Reporting, download our eBook here

Watch this video  to see how automated accounting software can help you remain compliant.