1. EFRAG Advisory Forum on Revenue Recognition A regulators’s perspective
Philippe DANJOU - Chief Accountant - AMF
AMF - titre de la présentation
01/01/2019

2. Importance of Revenue data for investors
OFTEN AN ELEMENT OF ENTITY’s MARKET CAPITALIZATION
« ECONOMIC » (= MANAGED) vs ACCOUNTED REVENUE AMOUNT (e.g order backlog )
RISK THAT NON GAAP MEASURES BECOME PROMINENT
ANALYTICAL APPROACH
UNDERSTANDING THE BUSINESS FROM THE P/L STRUCTURE
 MANAGEMENT’S VIEW IS ALSO IMPORTANT TO INVESTORS
FORECASTING FUTURE PERFORMANCE
IS ASSET / LIABILITY APPROACH THE MOST USEFUL ?
PORTFOLIO ALLOCATION - COMPARABILITY
AMONG LISTED COMPANIES
AT WHICH LEVEL ?
CROSS BORDER
AT LARGE INDUSTRY SECTOR LEVEL ?
BETWEEN DIFFERENT SECTORS ?
AMF - titre de la présentation
01/01/2019

3. Regulators concerns (1)
NEED FOR A COMMON SET OF PRINCIPLES THAT APPLY TO ALL LISTED COMPANIES
HIGH LEVEL PROBABLY NOT SUFFICIENT TO GUARANTEE COMPARABILITY OF FINANCIAL STATEMENTS
SOME ADDITIONAL GUIDANCE AT INDUSTRIES LEVEL MAY BE NEEDED
SHOULD IT BE PART OF IFRS OR IFRIC ?
PRINCIPLES MUST BE CLEAR AND COMPREHENSIVE ENOUGH TO BE ENFORCEABLE
HOWEVER REGULATORS IN E.U HAVE NO APPETITE FOR DETAILED RULES FOR EACH INDUSTRY
JUDGMENT AND BEST PRACTICES + TRANSPARENCY
AMF - titre de la présentation
01/01/2019

4. Regulators concerns (2)
COMPLEXITY ISSUES
COMPONENTS OF MULTI ELEMENT REVENUE TRANSACTIONS (UNBUNDLING)
ASSOCIATED COMMITMENTS AND COSTS TO COMPLETE
TIMING OF RECOGNITION
MEASUREMENT (FV ?)
ENTITY IS SUPPOSED TO BE A GOING CONCERN
ENTITY’S OWN COSTS RATHER THAN MARKET PRICE TO MEASURE THE COST OF DISCHARGING THE OBLIGATION ?
CONSERVATISM / PRUDENCE IN MEASUREMENT ?
SOME CONCERNS REGARDING « MARK TO MODEL PROFITS », DAY 0 / DAY 1 PROFITS.. AND EARNINGS MANIPULATION
RELIABILITY vs FAITHFUL REPRESENTATION ?
USEFULNESS OF A FAIR VALUE BASED MEASUREMENT OF REVENUES ?
ACCOUNTING RECOGNITION OR FINANCIAL DISCLOSURES ?
AMF - titre de la présentation
01/01/2019

5. Regulators concerns (3)
TYPICALLY ENCOUNTERED REVENUE ACCOUNTING DIFFICULTIES
Respective scopes (and clarity ?) of IAS 18 and 11
Gross amount of transactions versus net margin (pass through? Expenses vs revenue deductions ?)
Service element (single or multiple) associated with sale of goods – unbundling and measurement of components ; application of IFRIC 4
Sale of license recognized with a different pattern of payments terms
Customers loyalty programmes
Timing of recognition for intangible services ( e.g software development)
Timing of recognition for prepaid subscriptions – deferral ? Accrual for costs ?
Sales with conditional clauses (Transfer of risks and rewards)
Sale of extended warranties
Timing of revenue recognition regarding claims in long term contracts (application of percentage of completion method)
Sale with repurchase clause vs lease accounting
Etc…
AMF - titre de la présentation
01/01/2019