Business
IFRS 15 early adoption and presentation
IFRS 15 early adoption and presentation.
About this update from Capita Plc
[{"type":"text","content":"\n \nIFRS 15 early adoption and presentation\n\nCapita plc (‘Capita’) is today hosting a presentation for institutional investors and analysts on the application of the International Accounting Standards Board's IFRS 15, Revenue from Contracts with Customers which, as previously stated, the Group adopted from 1 January 2017. Capita’s results for the first six months of 2017 are due to be released, as planned, on 21 September and are expected to be in line with the outlook provided in our AGM statement on 13 June 2017.\n\nSummary of key points of adopting IFRS 15:\n\nNo impact on:\n\n• Lifetime profitability of contracts\n\n• Cash flow of contracts\n\n• Majority of transactional businesses.\n\nKey impacts:\n\n• The main changes for Capita from the adoption of IFRS 15 are in its long-term contracts and software business.\n\n• Revenue is more evenly phased over the life of contracts and active software licences in line with the delivery of valued outcomes to clients and, consequently, the timing of profits is re-profiled.\n\n• Capita will potentially recognise lower profits or losses in the early years of contracts where there are significant upfront restructuring costs or higher operating costs prior to transformation, with a compensating increase in profits in later years. The total net impact at Group level is a function of the balance of contracts in early or late stage of their life cycle at transition to IFRS 15.\n\n• Balance sheet includes:\n\n• New “contract fulfilment assets†created in the process of transforming services\n\n• Deferred income in relation to contracts where payments have been received from clients to undertake transformation prior to the planned outcomes being delivered.\n\nNick Greatorex, Group Finance Director, commented:\n\n“We believe early adoption of IFRS 15 is a sensible step to take in this transitional year for Capita. Adoption in 2017 immediately provides a consistent basis for our investors to evaluate our business going forwards. It ensures we have embedded the new standard well in advance of the 2018 deadline and is in line with our strategy of simplifying the business and improving transparency.\n\nThe new standard more closely aligns our revenue recognition with the commercial substance of our contracts. The application of IFRS 15 has no impact on the life...