The impact of IFRS 15 on the local construction industry

Abstract

Purpose: Following an assessment of the existing revenue practices, this study evaluates the changes within local construction companies as a result of the implementation of IFRS 15. Noting that the standard might have accounting implications, the impact on the external audit is also given consideration. Design: A qualitative approach, through the use of semi-structured interviews, was considered to be appropriate for the fulfilment of the research objectives. In this regard, the findings of this study represent the views of an architect, six financial controllers, four auditors and three IFRS technicians on the subject matter. Findings: Primary and secondary data failed to anticipate any significant change in the timing of revenue recognition. Nonetheless, exceptions to this rule will adversely affect local construction companies. In all instances, the increased level of judgements, estimates and disclosures under IFRS 15 will require new internal controls, systems, and processes. More audit procedures on the entities’ internal controls will, in turn, be needed to obtain reasonable assurance. Conclusions: In view of the limited awareness and lack of preparedness, Maltese construction companies should evaluate the impact such standard will have on their company by gaining a solid understanding of its principles and consulting an IFRS technical expert. Value: The findings of this dissertation provide an insight on the implications the new revenue standard may have on local construction companies. For this purpose, the study may assist such entities in planning the necessary changes required for the proper implementation of the standard. Value may also be given to the dissertation in view of the limited research on the subject matter in the local scenario.