The new revenue model is a reality: The new global revenue recognition standard will apply a single model to all contracts with customers in order to improve comparability within an industry, across industries and capital markets. For Entertainment and Media companies, the model used to determine the pattern of revenue recognition for licenses may change significantly. Also, many arrangements include minimum guaranteed payments with additional potential variable consideration in the form of royalties or other incremental payments. Management will need to assess variable consideration in determining the transaction price to be allocated to the performance obligations.
The new model will have accounting impacts including:
It is clear that adoption of the new standard will impact people, policies, processes and systems. Management will need to perform a comprehensive review of existing contracts, business models, company practices, accounting policies, information technology systems, and internal processes and controls to assess the extent of changes needed as a result of the new standard. PwC can help as companies navigate this complex change. Resources are provided below to help you assess the impact on your organization, however feel free to contact our subject matter experts to have a more in depth conversation.
IFRS accounting considerations: Industry supplements