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CFO Survey - the new IFRS

Results Overview

The Survey

Early summer of 2017 you may have received a request to participate at a survey on the new IFRS, namely IFRS 15 (Revenue from Contracts with Customers) and IFRS 16 (Leases). The survey was focused on how well the Luxembourgish companies are prepared for the implementation of these new standards.

Because issuers discussed and lobbied for a long time against the new standards issued by the IASB issued, it may be derived that the consequences of these standards would be material to many companies.

Background in a nutshell

The new revenue recognition standard may significantly impact revenue and profit recognition, with broader implications on tax positions, loan covenants and KPIs. The transition could require significant effort, time and appropriate accounting treatments, restate historic data, implement new processes and establish internal controls. Companies may also want to consider changes to customer contracts to avoid negative accounting consequences and bonuses or compensation arrangements for executives and employees linked to revenue. IT systems need to get ready to extract information needed for the new revenue recognition process.

IFRS 16 sets out a new model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. The standard requires the on balance sheet recognition of all leases. Besides this, expected impacts will be changes in performance indicators such as EBITDA, effect on debt covenants, re-assessment of KPIs.

The European Financial Reporting Advisory Group (EFRAG) has performed a quantitative analysis over the impact of IFRS 16 on a sample of listed entities in the European Economic. This analysis supports the fact that the implementation of IFRS 16 will have a significant impact on the European entities.

More specifically, the simulated lease liability represents 4% of total debt and 1.3% of total liabilities. If financial institutions are excluded, the simulated lease liability represents 16% of the total debt of the entities. The simulated right-of-use asset represents 14.8% of the net property, plant and equipment, while the simulated lease liability represents 8.7 times the amount of capital leases debt (450.9 billion to 52 billion Euro).

The European Securities Market Authority (ESMA) published a statement in July 2016 emphasizing the need for consistent application about the impact of the new standards. ESMA confirmed that it expects companies to know, or to be able to reasonable estimate, the impact of the adoption of IFRS 15 when preparing their 2017 interim financial statements. Where the impact is expected to be significant, ESMA expects issuers to provide information about the accounting policy choices that are to be taken upon initial application of IFRS 15 , disaggregate the expected impact depending on its nature and by revenue streams and explain the nature of impacts so that users of financial statements understand the changes to current practices and their key drivers.

Taking into account the significant impact that these two new standards may have, it is of great interest to gain an insight on the degree at which Luxembourgish companies are prepared.

Survey results

IFRS 15 Revenue from Contracts with Customers

In order to understand how well Luxembourgish companies are prepared and what actions they have taken for the implementation of the IFRS 15, we raised certain questions.

The survey evidenced that the majority of the entities do not actually have a detailed understanding of the requirements of IFRS 15. 67% of the participants replied negative to this question.

The reasons why (not) were mainly attributed to the irrelevance of IFRS 15 for the organization applied (45%), or that IFRS 15 is not a priority for the operation of the entity (40%).

In preparing for the implementation of IFRS 15, the CFOs considered mainly the impact of IFRS 15 in the accounting policies (41%) and the accounting disclosures (29%).

What elements did you consider in preparing for implementation of IFRS 15?

Although CFOs consider primarily the impact on the accounting policies more, other elements are also important to be taken into consideration. Specifically, IT, Human Resources and Legal elements on the implementation are not the top priority of CFOs.

A lot of time and effort may need to be undertaken to assess the implications of the implementation of IFRS 15 on IT elements, by means of preparing the systems to collect and analyze the information needed to produce acceptable disclosures, especially those related to customer contracts with variable considerations (i.e. rebates and discounts).

Legal matters should be taken into consideration as well, as the new standard introduces new ramification for how contracts are worded.

Human resources concerns may arise to companies that have bonuses and compensation arrangements for executives and employees that are linked to revenue. In such cases, the companies need to decide whether to realign the arrangement to reflect how revenue is now recognized.

IFRS 16 Leases

The results for IFRS 16 were also interesting with the survey to reveal that Luxembourgish entities are not yet prepared (80%).

Justifying the above, most participants did not implement a tool to help them analyze key information from contracts, but prefer to assess the key elements of the contracts manually (83%).

Although the majority of participants replied that the entity has a lease contract, they do not seem to have taken action yet to implement the requirements of the standard.

The main elements that CFOs consider while preparing for implementation of IFRS 16 are the accounting disclosures (23%), the accounting policies (23%) and the training of the personnel involved (18%).

What elements do you consider while preparing for implementing IFRS 16?

Although the CFOs are more focused on accounting disclosures and accounting policies, other elements are also very important and should be taken into consideration.


The results of the survey revealed that there is significant work still to be undertaken by Luxembourgish companies in order to get implementation IFRS 15 and IFRS 16 even started.

Both standards may have a significant impact on an entity’s financial statements. IFRS 15 will require a new revenue recognition process and may affect the revenue and profit of many entities. Issues beyond accounting may arise, such as IT implications, Legal and Human Resources issues. The survey showed that Luxembourgish companies do not consider the aforementioned factors as significant on the implementation. However, the new standard is going to have significant implications on these aspects of the business and it may take time and effort to apply these changes.

Lease accounting will significantly impact lessees and will impact EBITDA and cash flows.

Specific disclosure requirements are also implied in both standards.

We strongly suggest to CFOs to take action as soon as possible to assess the impact and get prepared for the implementation.

We would like to thanks to all the participants for their cooperation!

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