International Financial Reporting Standards
22 March 2018
Business leaders that deal with long-term contracting projects face unique financial reporting issues related to the accurate reporting of revenue. International Financial Reporting Standards (IFRS) require reporting revenue based upon the percent of completion of a project as of the last day of the reporting year (International Financial Reporting Standards [IFRS], 2015a). The IFRS accounting standards require management to assess project budget that is material to the financial statement results. Without appropriate internal controls, these estimates are susceptible to manipulation by the management.
Management’s estimate of contract revenue requires a project budget. Thus, the project budget, developed by management, has a direct effect on the revenue recognition of a contract. The main industry in Qatar is contracting, hence focusing on the new IFRS 15, which replaced IAS 11 and 18 starting from the 1st of January 2018 is significant to the contracting and construction sector. On the grounded of IFRS framework, IFRS 15 provides a comprehensive interpretation of the revenue recognition in all the sectors and the mechanism of recognizing the revenue along with the required criteria. Revenue recognition is a significant element of the financial statements, and its recognition must comply with the IFRS 15 to be able to generate accurate and reliable financial statements, which do not mislead the user.