Quality of Revenue Disclosures of European listed Companies

In this project, the quality of financial reporting on revenue recognition (IFRS 15) is our key research area. We will research the quality of revenue recognition disclosures for European listed companies by collecting data from recently published financial statements. Furthermore, we will identify qualitative and quantitative disclosures by means of a disclosure index based on IFRS 15 disclosure requirements.

We will also investigate determinants of disclosure quality: is disclosure quality dependent upon size; governance structure; risk appetite; leverage; collectability of receivables etc. Another interesting aspect of this research is the development of the disclosure quality compared to previous years. As a result of peer learning effects, one might assume that good practices will be shared and used in the subsequent financial statements. The current body of literature will be examined to formulate hypotheses in this area.


Introduction to Quality of Revenue Disclosures

In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15 Revenue from Contracts with Customers. IFRS 15 established principles for reporting information about the nature, amount, timing, and uncertainty of cash flows arising from an entity’s contract with customers. IFRS 15 superseded former standards like IAS 18 Revenue and IAS 11 Construction Contracts and became effective for financial statements beginning on or after 1 January 2018.

Since 2018, IFRS issuers publish financial statements including the application of IFRS 15. In particular, industries with long-term, more complex contracts are significantly affected by the introduction of IFRS 15. Examples of these sectors are the construction, information technology and telecommunications industry. These industries are popular for more complex contracts including variation in contract work, claims and price discussion. Within these industry complex contracts, including the promise of multiple goods and services and various contract clauses (e.g. bonus and malus agreements) affecting the transaction prices. This all requires significant judgments in the application of IFRS 15.

Revenue Disclosures in Financial Statements

Early research on the quality of IFRS 15 disclosures in the financial statements over 2018 and 2019 shows that there is room for improvement in particular related to disclosures of accounting policies for revenue recognition and on significant judgements applied. Furthermore, disclosures on revenues are usually high on the agenda of regulatory bodies such as the ESMA. In that regard, the ESMA highlighted the importance of further improving disclosures on IFRS 15 given the prominence of revenue in the financial statements. In particular, ESMA highlights the importance of disclosures on accounting policies, significant judgements, disaggregation of revenues and contract balances.

With IFRS 15 into operation, this research aims to provide a contribution on the quality of disclosure of IFRS 15 based on a sample of 2020 financial statements. The expanded disclosures of IFRS 15 aims to help investors better understand the nature, timing and uncertainty of revenues recognized. For the years 2020, it might be interesting to research the overall disclosure quality and investigate whether the disclosure quality has improved compared to the previous year. In particular, this research will be relevant for standard setters, regulators and auditors. It might also give an indication of the absorption time to apply a major standard.


Research on Revenue recognition

Main research question:

Research question: What is the influence of the structure of the Audit Committee on the quality of revenue disclosures regarding IFRS15? Furthermore, what role plays board structure, size of the audit committee, and size of the firm in this relation?


How does the structure of the audit committee impact the quality of revenue disclosure?

What influence has the size of the audit committee on the relationship between the audit committee and the quality?

Ways in which the size of the firm impacts the relationship between the audit committee and the quality?

How does the structure of the board influence the quality of revenue disclosure?

The impact of the structure of the board on the relationship between the audit committee and the quality of the disclosure?

Is IFRS15 put better to use in the year 2020 than 2019?

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