A new global standard on revenue: What this means for the software and cloud services industries

Recently issued IFRS 15 ‘Revenue from Contracts with Customers’ replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’ and provides significant new guidance addressing key questions such as:

• Can promised customisation and installation services be considered separately from the related software sale?
• Should revenue on a time-based licence be recognised over time, or at a point in time?
• When does entering into a second contract with the same customer impact revenue on the original contract?
• For bundles of software and services, how is the total price allocated to individual performance obligations?
• Can revenue be recognised before a licence commences?
• In Software-as-a-Service (“SaaS”) delivery models, can the licence and hosting be separated
• How should revenue be recognised on software sales with royalty-based pricing?

With the potential to significantly impact the timing and amount of revenue recognised, software and cloud services companies will want to invest time up front to ensure all critical impacts are identified and understood well in advance of implementation

Download the new global standard on revenue: What this means for the software and cloud services industries

The International Accounting Standards Board (IASB), along with the FASB in the US, have finally issued their new Standard on revenue – IFRS 15 ‘Revenue from Contracts with Customers’.

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