Accueil
/ Publications
/ Articles
/ Revenue Recognition – Why Is It Still Going Wrong?

Revenue Recognition – Why Is It Still Going Wrong?

Since January 2018 with the introduction of IFRS 15 Revenue from Contracts with Customers, revenue recognition remains one of the most persistent financial reporting problem areas for Australian organisations. It continues to feature as one of ASIC’s Enduring Financial Reporting Focus Areas,¹ in audit findings and key audit matters,² in restatements and in corporate scandals seen in the media.

Major Australian and international organisations have hit the headlines facing public scrutiny, highlighting that revenue issues aren’t just technical accounting matters. They can go to the heart of the customer relationship, carry reputational risk, directly impact enterprise value, strain auditor and stakeholder relationships and can result in expensive commercial disputes.

So why is revenue recognition still going wrong?

A Brief Look Back at IFRS 15

Historically, revenue recognition was fragmented (IAS 18, IAS 11 and numerous interpretations) and rules-based varying by industry and transaction type. Finance teams often relied on industry norms or pragmatic practices such as aligning revenue to invoicing or cash flows.

IFRS 15 fundamentally changed that landscape. It introduced a consistent global framework that is:

grounded in contract concepts – a contract-centric model
structured around a five-step framework
supported by detailed application guidance on items such as performance obligations, variable consideration, principal vs agent and timing of control transfer.

One of the key results was the removal of the “grey” or ambiguity in the previous standards - meaning assessments which initially appeared comparable, proved to have very different outcomes when looked at in detail.

While technically robust, IFRS 15 also required a behavioural and operational shift – one that many organisations underestimated and have failed to deal with over time. Combined with the lower market emphasis on financial reporting and compliance, relative to more regulator-driven environments, our observations suggest IFRS 15 was adopted but not truly implemented in Australia.

Fast-forward to today, CFOs are reporting revenue growth optimism with majority projecting double-digit revenue growth for 2026.³ However, pressure to deliver on growth targets in a difficult economic backdrop has been pervasive since the pandemic, with subdued GDP growth and persistent macro-economic headwinds.⁴ This creates a consistently challenging operating environment which can drive organisations toward growth initiatives that further accentuate revenue recognition issues.

Implementation Issues – Where It Started…and Still Persists

Despite significant implementation efforts, many organisations exhibited fundamental flaws in their IFRS 15 adoption that created ongoing audit and dispute risks. These weaknesses fall into three primary categories:

Contract Mindset

The transition to IFRS created a framework with a much clearer emphasis on the importance of contracts. This has only been reinforced by IFRS 15, yet many finance teams have not adapted their mindset, processes or systems as they arguably should.

Contract lifecycle management is a critical business process that spans multiple functions and stages – from initial negotiation and execution through to performance, variation and close-out. Finance plays a critical role in this lifecycle, not merely as a downstream recipient of information, but as an active participant in ensuring that commercial arrangements are structured in ways that not only support commercial outcomes but align financial reporting and compliance with revenue recognition standards.

Too often, the contract mindset – essential as an IFRS reporter – has not been embedded within the finance function, resulting in people and process gaps. As a result, contracts – which may include master service agreements (“MSAs”), side deeds, amendments, emails, and variations – are not maintained or considered together as a cohesive whole. This creates significant risk as finance may not be aware of key terms or variations that directly impact revenue recognition and revenue assessments are performed after the fact often on incomplete data.

The contract-based nature of IFRS 15 demands that finance establish stronger connections with legal and commercial teams, who are typically responsible for drafting and managing contractual documentation. Legal teams possess critical insights into the interpretation of contract terms, the enforceability of obligations, and the implications of variations or disputes – all of which have direct financial reporting consequences.

Public cases demonstrate how supplier income, incentives and contract variations agreed commercially can quickly become material revenue recognition failures.

Coverage and Materiality

In theory, IFRS 15 requires a contract-by-contract assessment. In practice, we have seen many organisations that implemented IFRS 15 with limited detailed contract reviews and a heavy reliance on management materiality thresholds (an audit concept debatably applied by management).

Driven by time and cost constraints or a large volume of contracts, implementation coverage was often restricted and reviews were performed only on significant (high dollar value or high risk) contracts. In many cases, there was a carry forward of existing revenue treatment. In some senses, materiality became a practical shield but small errors across many contracts add up and compound over time.

This means that revenue issues can persist undetected for years, and when identified, the response is often retrospective, corrective and public. Revenue recognition practices that may have been applied consistently over time can later be reassessed following regulatory review. This can result in significant reclassification of revenue across multiple years, despite no change in underlying cash flows.

Underestimation of IFRS 15 Changes – Legacy Thinking

A common implementation mistake was assuming IAS 18 and IFRS 15 were substantially similar. A popular narrative during transition was that IFRS 15 largely codified existing practice. This assumption was convenient and, in some ways, understandable at a very high-level - but still wrong.

IFRS 15 significantly changed both the reasoning framework and the evidence required to support revenue recognition conclusions. Even in areas where the outcomes appeared similar, IFRS 15 eliminated much of the grey area that existed under IAS 18, reducing the scope for professional judgment and requiring more rigorous documentation. Once again, similar / acceptable outcomes on implementation can change over time, with shifts in circumstances, compounding of small gaps or simply as the business gains scale.

A heavy reliance on existing accounting positions, where management’s judgements aligned to prior-year treatments and conclusions appeared reasonable in aggregate, created an unintended form of audit complacency. Complacency that was not necessarily due to a lack of diligence, but because IFRS 15 was new, complex and applied across the market with varying levels of maturity. Once a position was established and signed off, it often became embedded as “accepted practice” and rarely re-challenged. This would often only come to light following a change in auditor – with revenue adjustments and restatements persistently identified years later by the new auditor, indicating potential flaws in the original implementation process.

Finance teams that fail to recognise this fundamental shift continue to face heightened audit risk and potential challenges to their revenue recognition positions particularly under new auditor or regulator review.

Steps To Get Revenue Recognition Right

What works – and what we have implemented in the market – is addressing revenue holistically, including:

Making deliberate changes to contract terms – remove contract term ambiguity with simple and standardised language (critically for deliverables/services, pricing mechanics and variations).
Establishing a contract-centric finance team – integrate finance teams into contract negotiations. Implement contract management systems that consolidate all contract-related documents and enable comprehensive revenue recognition assessments. Develop cross-functional processes between legal, commercial, and finance teams to ensure revenue recognition implications are evaluated before contracts are executed.
Reassessing legacy treatments – review ‘safe’ revenue streams and challenge materiality assumptions.
Strengthening governance and documentation – clear policies with practical examples and documentation that is audit ready. Identify revenue streams with elevated risk profiles – including rebates, variable consideration, multiple performance obligations, and principal versus agent determinations. Implement enhanced controls including the effective use of technology to drive coverage and efficiently analyse (i.e. automated workflows, storage, Optical Character Recognition and AI intelligence).

Finally, recognising that business doesn’t stand still. Products, services, prices, discounts, rebates and incentives change continually. People and process need to evolve with the business to support the commercial objectives whilst derisking compliance. Those organisations that avoid the next headline treat revenue not as an accounting standard to comply with, but as a core financial discipline embedded into how the business operates.

Footnotes:

1: ASIC, “ASIC announces financial reporting and audit focus areas for FY 2025-26” (May 19, 2025)

2: Chartered Accountants Australia and New Zealand, “Insights into Australian Key Audit Matters” (May 29, 2025)

3: FTI Consulting, Inc., “FTI Consulting’s CFO Strategies: 2026 Global CFO Report,”

4: Australian Bureau of Statistics, “Australian economy grew 0.4% in the September quarter” (Dec. 3, 2025)