FRC publishes thematic review findings of IFRS 9 and IFRS 15 company disclosures

November 5, 2018

Published: The Financial Reporting Council

The Financial Reporting Council (FRC) has today published two thematic reviews to help companies improve the quality of their corporate reporting in relation to the new accounting standards IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’.

The reports analyse the disclosures in a sample of companies’ June 2018 interim reports in relation to the adoption of the new standards and provide examples of better practice in explaining their effect.  The FRC expects other companies to use these examples to benchmark the quality of their own disclosures in their upcoming annual reports and accounts.

Paul George, FRC’s Executive Director for Corporate Governance and Reporting, said:

“Revenue is a key metric for all companies.  IFRS 15 will have a significant impact on the timing of revenue recognition for many companies.  It is very important that companies clearly explain the changes to their revenue recognition policies and the impact of the new standard on their results.  Disclosures in the interim accounts that were reviewed as part of our thematic work were of mixed quality.”

“The expected credit loss model introduced by IFRS 9 will have a major effect on how banks calculate their loan loss provisions.  High quality disclosures, including quantification of estimation uncertainty, is essential in order to communicate the impact of the new model to users. Although IFRS 9 will not have a material effect on many non-banking companies, we still expect them to undertake a thorough impact assessment to support that conclusion.”

The disclosure requirements for annual accounts are much more extensive than those required in interim accounts. In particular, the FRC expects to see:

– Comprehensive explanations of the impact of transition with links to other relevant information in the annual report and accounts;

– Clear descriptions and explanations supporting changes to accounting policies, including any associated judgements made in their determination.


Clear identification and explanation of performance obligations, a new concept introduced by IFRS 15, with a focus on judgements made both in their determination  and when they are considered to be satisfied; the impact of the standard on the balance sheet to also be addressed, including accounting policies for contract assets and liabilities.


Quantification of the effect of estimation uncertainty in measuring expected credit losses and disclosure  of the sensitivity of the amounts to changes in assumptions and estimations and / or a range of reasonably possible outcomes; and

– Evidence of consideration of the potential impact of the new standard, even where it does not have a material effect.

We encourage companies to invest sufficient time during their year-end preparation to ensure that transition disclosures are comprehensive and company-specific.

The FRC will challenge companies who do not provide an adequate level of disclosure about the impact of the new standards through their regular accounts review process next year.

Follow-up thematic reviews planned for 2019/20

The FRC will continue to supplement its routine monitoring programme with thematic reviews of aspects of corporate reporting where there is both stakeholder interest and scope for improvement and learning from better practices.

To continue our analysis of the adoption of IFRS 15 and IFRS 9, we will perform follow-up reviews on companies’ disclosures around revenue and financial instruments, and their impact, in a sample of annual reports.  We will assess companies’ compliance with the more extensive set of year-end disclosure requirements.  We will again select our samples from those sectors which are more heavily impacted by the new reporting requirements.


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