Babcock says IFRS 15 will not need change in contract revenue, profit recognition

Babcock on Monday said the adoption of new accounting rule IFRS 15 would not require a change in contract revenue or profit recognition.

IFRS takes effect on January 1, 2018. It “identifies performance obligations in contracts with customers, allocates the transaction price to the performance obligations and recognises revenue as performance obligations are satisfied”, Babcock said.

The standard requires revenue recognition either "over time" or at a "point in time" and additionally requires more detailed disclosures.

"We have completed a detailed review of all material contracts, including consideration of all types of contracts undertaken by the Group and the results of our review confirm that IFRS 15 will not result in a material change to the timing of revenue or profit recognition on service provision contracts or long-term service contracts,” Babcock said in a statement.

“This assessment reflects that the group's contracting arrangements, which are predominantly long term service contracts, result in the continual transfer of the benefits of the group's performance to customers over time.”

"The review also indicates that the new standard is not expected to introduce any material change to the group's revenue recognition policy in relation to revenue from the sale of goods not under service provision contracts or long-term service contracts. Point in time recognition of revenue will continue to apply to such contracts."