LONG-TERM CONTRACTS REVENUE RECOGNITION UNDER IFRS 15: THE EXAMPLE OF A CONSTRUCTION FIRM

Abstract

It’s impossible to understand financial statements without knowing principles, rules, methods and guidelines of accounting. The economists who develop financial models must take into account and apply at least the most significant requirements of accounting standards. This paper addresses fundamental issues concerning the recognition of revenue on long-term contracts under new revenue recognition standard IFRS 15. The main accent is on construction contracts. For long-term contracts entities should recognize revenue over time as long as performance obligations are satisfied, or at a point in time, usually after the full completion of the contract. The paper provides examples of financial models in which revenue is calculated in accordance with main IFRS 15 requirements.