Abstract
Revenue is fundamental in assessing an entity’s financial performance and is a significant measure for both internal and external financial reporting. Revenue recognition based on unsound principles could ultimately destroy a company’s value. Recognition refers to the timing of when a transaction is recorded. The problematic issue of when revenue should be recognised has been debated for more than a century. Over the years, the issue has become further complicated by the introduction of intricate customer contracts and complex business models which involve multi-element transactions. In May 2014, the International Accounting Standard Board and the Financial Accounting Standard Board issued a joint revenue recognition standard, IFRS 15: Revenue from Contracts with Customers. The purpose of this new standard was to clarify the principles for recognising revenue and to create a joint converged revenue recognition standard for both IFRS and US GAAP entities. IFRS 15 introduced a 5-step approach to revenue recognition and measurement, which focuses on the principle of the transfer of control when recognising revenue. This new approach to revenue recognition and measurement should not have a significant impact for some entities. On the telecommunications industry, however, this impact has been far more profound. This is chiefly due to the complex nature of the industry’s multi-element arrangements of revenue contracts entered into with customers. This study critically evaluates the adequacy of IFRS 15 for the telecommunications industry using a doctrinal research methodology. This qualitative research method involves a systematic process of gathering relevant facts, identifying, analysing, organising and synthesising legal statues, judicial decisions and commentary to arrive at a conclusion. Although this methodology is typically employed in the legal field, it is also appropriate for accounting research for the following reasons: (i) compliance with International Financial Reporting Standards is written into law through the Companies Act of South Africa; (ii) accounting standards can be considered as doctrines because they consist of rules, principles, norms and guidelines which have been developed and applied through practice, and (iii) doctrinal research has previously been applied...
M.Com. (Accounting)