26 September 2018
The timing of when businesses receive revenues from customers is in the spotlight thanks to IFRS 15. A good financing facility can mitigate the balance sheet impact of the new standard and improve working capital.
IFRS 15 Revenue Recognition
IFRS 15 – Revenue from Contracts with Customers, which specifies how a supplier should record all the revenues from the contracts it enters into with its customers, came into effect for the accounting period beginning on or after 1 January 2018. It applies to the majority of contracts with customers where a business has ongoing performance obligations that a customer pays for.
This reporting standard may have significant balance sheet and P&L implications for businesses since it could significantly delay their ability to recognise and deploy revenue in some cases. One way for them to mitigate this, and improve their working capital position, is by taking advantage of a contract receivables financing solution.
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IFRS 16 will change the way that companies recognise leases on their balance sheets, and impact on loan covenants.