Accounting

Impact of FRS 115 on Accounting for Revenue and Costs

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On May 28, 2014, the IASB published IFRS 15: Revenue from Contracts with Customers, and Singapore issued FRS 115 on November 19, 2014. Effective from January 1, 2018, FRS 115 will replace several existing standards, including FRS 11 and FRS 18.

    • Costs are expensed when incurred, except for:

                * Assets under other standards (e.g., inventories, property).

                * Incremental costs to obtain a contract expected to be recovered.

               * Costs to fulfill a contract expected to be recovered.

      • Recognized costs are amortized systematically and tested for impairment.

      • The transaction price includes the estimated variable consideration.

      • Revenue is recognized only when it’s highly probable that no significant reversal will occur.

      FRS 115 requires businesses to update their accounting policies and systems to ensure compliance. This standard promotes more accurate financial reporting, improving transparency and consistency.

      Prepare your business for FRS 115 to ensure compliance and achieve clarity on your profitability.

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      Written by Kelvin Loh