The adoption of IFRS 15 from 1 January 2018 has had the largest impact on the firm’s net sales and trade receivables which have been adjusted to reflect a €1m increase. Shareholders’ equity increased by €100,000 but the new accounting standard has had a negative impact on the company’s inventories which have dropped by €80,000.

IFRS 15 superseded IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers with an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Under IFRS 15, an entity recognises revenue when a performance obligation is satisfied, ie, when control of the good or service underlying the particular performance obligation is transferred to the customer. These principles are applied using the following five steps:

1. Identify the contract(s) with a customer

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations in the contract

5. Recognise revenue

Aspocomp uses consignment warehousing with certain customers, which may mean that the recognition of revenue may result in the earlier timing of earnings, with revenue being recognised when the product arrives in the warehouse.

IFRS 9 has had less of an impact on the company as it does not have significant amounts of financial instruments except customer receivables and interest rate derivates and does not apply hedge accounting as defined by IFRS.

The application of the expected credit loss model of IFRS 9 resulted in earlier recognition of credit losses. Following this, Aspocomp has lost €50,000 in retained earnings and trade receivables.

Report by Amy Austin