STATUS OF REVENUE CHANGE AFTER IMPLEMENTATION OF IFRS 15: SECTOR ANALYSIS IN AZERBAIJAN

Abstract

IFRS aims to maintain stability in the financial world. In terms of international financial relations, borders have almost disappeared. States and the national companies in which they reside have integrated with each other in the sphere of economic relations. The most important factor for this integration in terms of economic and financial relations is the existence of a common language. In this regard, the study of International Financial Reporting Standards (IFRSs) is very relevant.
The purpose of the study is to examine the main requirements of IFRS 15 "Income from contracts with customers", to analyze the mechanisms of application in different sectors, to analyze the impact of the transition to the standard on the financial results of enterprises. The application process of IFRS 15 "Income from contracts with customers" in Azerbaijan is analyzed.

Full text

THE SUSTAINABLE DEVELOPMENT OF ECONOMY AND ADMINISTRATION:
PROBLEMS AND PERSPECTIVES
WITH THE JOINT ORGANIZATION BY THE MINISTRY OF EDUCATION AZERBAIJAN REPUBLIC AND BAKU ENGINEERING UNIVERSITY
BAKU ENGINEERING UNIVERSITY
INTERNATIONAL SCIENTIFIC AND PRACTICAL CONFERENCE
24-25, December 2021, Baku, Azerbaijan
www.beu.edu.az
PROCEEDINGS

THE SUSTAINABLE DEVELOPMENT OF ECONOMY AND ADMINISTRATION: PROBLEMS AND PERSPECTIVES
236
maddələrinə əsasən heç vaxt nəzərə alınan xərclərə aid edilmədiyinə görə, mühasibat uçotu mənfəəti ilə
həmişə fərqlər yaradır. Vergi Məcəlləsinin gəlirdən çıxılmayan xərclərin maddələrindən bir neçəsini qeyd
edək:
 Qeyri-kommersiya fəaliyyəti ilə bağlı olan xərclər (Maddə 109.2.),
 Əyləncə və yemək xərcləri, işçilərin sosial xarakterli xərcləri ( Maddə 109.3.),
 Fiziki şəxsin fərdi istehlakla, əmək haqqının alınması ilə bağlı olan xərcləri
 (109.5.),
 Ezamiyyə xərclərinin qanunvericilikdə təyin olunmuş məbləğdən artıq olan
 hissəsi (Maddə 109.7.),
 Nəzarət-kassa aparatının çeki və ya qəbzi bir sıra hallarda ( Maddə 109.8.),
 Əmtəəsiz əməliyyatlar çərçivəsində əldə edilmiş sənədlər ( Maddə 109.9.).
Vergi Məcəlləsinin gəlirdən çıxılan xərclərin maddələrini qısa olaraq qeyd edək:
 Xaricdən alınmış borclar üzrə müəyyən hallarda ( Maddə 110.1.),
 Ehtiyat sığorta fondlarına ayırmalar (Maddə 112.),
 Elmi tədqiqat, layihə-axtarış işlərinə çəkilən xərclər ( Maddə 113.),
 Normalar daxilində amortizasiya ayırmaları (Maddə 114.).
Vergi Məcəlləsinin maliyyə və vergi tutulan mənfəəti arasında müvəqqəti fərqlər yarada bilən
maddələrini qeyd edək:
 Mühasibat uçotunda fərqli amortizasiya normalarının tətbiqi nəticəsi olaraq fərqli amortizasiya
xərlərinin yaranması, vergi uçotunda ancaq bir amortizasiya metodunun tətbiqi nəticəsi olaraq amortizasiya
xərlərinin yaranması ( Maddə 110),
 Mühasibat uçotunda gəlirin və xərcin uçotu zamanı ancaq hesablama metodunun tətbiq olunması
tələbi, vergi uçotunda isə həm hesablama həm də kassa metodunun tətbiq olunması (Maddə 130).
 Mühasibat uçotunda aktivlərin yenidən qiymətləndiriməsi nəticəsində dəyərinin dəyişməsi, vergi
uçotunda isə aktivlərin yenidən qiymətləndiriməsi nəticəsində yaranan artımın daxil edilməməsi (Maddə
143).
Ədəbiyyat siyahısı
1. Azərbaycan Respublikasının Vergi Məcəlləsi.
2. “Mühasibat uçotu haqqında” Azərbaycan Resp. Qanunu. Bakı, 2004
3. A.R.Kərimov Mühasibat uçotu, vergilər. Bakı, 2010
4. V.Quliyev, R.Fətullayev Beynəlxalq uçot və hesabata giriş. Bakı, 2011
5. www.taxes.gov.az
STATUS OF REVENUE CHANGE AFTER IMPLEMENTATION OF IFRS
15 : SECTOR ANALYSIS IN AZERBAIJAN
Orkhan Zulfugarov Qalib
Baku Engineering University
ozulfuqarov@beu.edu.az
Firudin Sultanov Oktay
Baku Engineering University
fsultanov@beu.edu.az
Abstract
IFRS aims to maintain stability in the financial world. In terms of international financial relations,
borders have almost disappeared. States and the national companies in which they reside have integrated
with each other in the sphere of economic relations. The most important factor for this integration in terms
of economic and financial relations is the existence of a common language. In this regard, the study of
International Financial Reporting Standards (IFRSs) is very relevant.
The purpose of the study is to examine the main requirements of IFRS 15 "Income from contracts
with customers", to analyze the mechanisms of application in different sectors, to analyze the impact of the

Baku Engineering University, 24 -25 December 2021
237
transition to the standard on the financial results of enterprises. The application process of IFRS 15
"Income from contracts with customers" in Azerbaijan is analyzed.
Key words: Revenue, IFRS 15, Income, Financial Reporting
Introduction
In the 21st century, we are as of now seeing the clearest instances of globalization. As far as monetary
relations between the nations of the world, the lines have practically vanished and the states and the nearby
organizations in which they live have incorporated into one another in their financial relations. The main
factor that makes this incorporation conceivable as far as monetary and financial relations is the presence of
a typical language. We are not mistaken in calling this language IFRS. Thanks to such a standardized and
widely understood language, it has been possible for a company based in the developed countries to invest
in or cooperate with the developing countries company by looking at reports prepared in accordance with
these standards.
These standards are constantly changing and improving. One of the latest improved standards is IFRS
15, Revenue from Contracts with Customers. Revenue is one of the most important financial reporting
criteria for both financial statements developers and users. It is used to measure and assess aspects of an
entity's past financial performance, future prospects and financial health. Therefore, revenue recognition is
one of the most important issues for investors and regulators.[1]
IFRS 15, all old income standards and interpretations issued by IFRS, including IAS 11 “Construction
Contracts”, IAS 18 “Revenues”, IFRS 13 IFRIC “Customer Loyalty Programs”, 15 №- IFRIC has replaced
all standards and interpretations relating to Real Estate Construction Contracts, IFRIC 18 “Transfer of
Assets from Customers” and IFC 15 SIC-31 Revenue – Barter Transactions Involving Advertising
Services. Although it was previously decided to start the application of the standard on January 1, 2017, it
was later changed to January 1, 2018. In Azerbaijan, all entities that prepare their financial statements in
accordance with IFRSs are required to apply this standard from 1 January 2018.
Overview of IFRS 15
Revenue is one of the most important criteria for financial reporting for both developers of financial
statements and users. It is used to measure and evaluate aspects of the past financial performance, future
prospects and financial condition of an enterprise. Therefore, revenue recognition is one of the most
important issues for investors and regulators. Despite the importance and increasing globalization of global
financial markets, revenue recognition requirements differed from US GAAP and IFRS until new rules
were approved in 2014, which in turn led to different accounting for similar transactions [2].
The standard describes the rules that an element must apply to measure and receive wages
and related income. The basic standard is that the item be accepted as a discount for the transfer of large
items to a customer or administration in the amount they hope to receive revenue. IFRS 15 "Income from
contracts with customers"is applied in 5 steps.[3]
 Define the contract with the client;
 To determine the performance obligations in the contract;
 Determining the cost of the operation;
 Divide the transaction cost by the contractual performance obligations;
 Recognize revenue when an entity fulfills an executive obligation.
The agreement contains a guarantee to get it done or administrations to the client. An exhibition
commitment is an alternate guarantee as characterized in the pay standard. It can be relatively simple to
define performance obligations, such as the promise that an electronics store will make a TV. However, it
may be more complex to define performance obligations in a contract that includes services such as
providing a new computer system with a three-year software license, upgrade rights, and technical support.
Entities must determine whether their performance obligations will be accounted for individually or as a
group.
The exchange value is the amount that can be obtained in exchange for a decent amount or for
delivery by the management to the buyer. In determining the exchange value, various elements must be
taken into account, including a variable contribution, a substantial portion of the financing, a non-cash
contribution, or the amount payable to the customer.
The exchange value is allocated to the individual performance obligations in the contract based on
moderately autonomous bidding costs. Determining an appropriate independent selling price can be

THE SUSTAINABLE DEVELOPMENT OF ECONOMY AND ADMINISTRATION: PROBLEMS AND PERSPECTIVES
238
difficult if the goods or services are not sold independently. The income standard provides several methods
that can be used to estimate the selling price independently when not directly observed. It should also take
into account the distribution of benefits and variable payments.
Revenues are recognized when performance obligations are met. The income standard provides
guidelines to help determine whether an obligation has been performed at a specific time or period. If the
performance obligation is performed within a certain period, the relevant income is also recognized during
that period. [4]
Analysis of the Implementation of IFRS 15 in Azerbaijan in Different Sectors
The standard was first applied in the oil and gas sector of Azerbaijan on January 1, 2018. Companies
operating in this sector first reviewed the five-step model, which is a key part of the application of the
standard, and assessed the feasibility. In contrast to the income recognition method in IAS 18, IFRS 15
takes into account the difference between the share of actual production sold by the company before the
reporting date and the production share that the company is entitled to sell on a capital basis before the
reporting date there is no adjustment in income to buy. A venturer recognizes revenue from the actual sales
to customers during that period.
The table below shows the impact of the application of the standard on the financial results of selected
enterprises in 2017.[5]
Table 1: Changes in revenues as a result of the application of the new standard (Oil and gas sector)
Enterprises
IAS 18
IFRS 15
Difference
(inmanats)
Difference (in%)
SOCAR
111,296,000,000
111,198,000,000
98,000,000
0.8%
The reason for the decrease in revenues in SOCAR is that this enterprise is in an underlift position.
In the engineering and construction sector in Azerbaijan, companies operate mainly on the basis of
long-term contracts. They act as contractors in these contracts. Contracting parties often sign additional
agreements to change orders that change the scope or price (or both) of the main contract. Contractors often
have to incur additional costs as a result of delays, errors or any changes in the scope of the contract by
customers. They regularly submit additional claims to customers regarding these costs. In accordance with
IFRS 15, a contract is deemed to have been amended when the parties to the contract approve a new
change that changes the rights and obligations in the contract. Therefore, amendments to the contract are
very common in the engineering and construction sectors. Execution obligations were carefully assessed by
these companies to determine the difference between the remaining goods or services to be transferred at
the date of the adjustment and whether the prices correspond to independent selling prices. This assessment
is important to them because the accounting policies that will be applied in the future may vary
significantly depending on the results of the assessment.
The table below shows the impact of the application of the standard on the financial results of 3
selected enterprises in 2017. [9],[10],[11]
Table 2: Changes in revenues as a result of the application of the new standard (engineering and
construction sector)
Enterprises
IAS 11
IFRS 15
Difference (in
manats)
Difference (in
%)
Azfen JV
512,387,767
519,432,639
7,044,872
1.4%
Norm MMC
149,447,000
148,779,000
668,000
1.1%
Caspian Drilling
Company LLC
251,378,000
245,366,000
6,012,000
2.4%
The change is due to various reasons. In particular, it is possible to note the factors taken into account
in estimating the amount of payment, accounting for guarantees, and calculating the completion rate based
on the traps of the new standard.
Companies operating in the retail and consumer goods sector in Azerbaijan are reaching out to a large
number of consumers. The goods or services we sell include the millions of types of goods or services that
companies in various sectors use to create their goods or services, from what we use for daily needs.

Baku Engineering University, 24 -25 December 2021
239
The table below shows the impact of the application of the standard on the financial results of selected
enterprises in 2017. [6]
Table 3: Changes in revenues as a result of the application of the new standard (retail and consumer goods sector)
Enterprises
IAS 18
IFRS 15
Difference (in manats)
Difference (in %)
Azersun Holding MMC
730,002,688
740,952,728
10,923,040
1.5%
Thise enterprise have undergone significant changes in revenue as a result of the application of the
detailed requirements of the new standard, in particular the requirements for refunds and variable
payments.
Retailers and retailers often give customers the option to purchase additional goods or services. These
options include tools to encourage customers to buy (e.g., limited number of coupons, gift cards), customer
premium loans (e.g., loyalty or reward programs), contract renewal options (e.g., waiver of certain
payments, reduction of future interest rates), or future are offered to customers in different forms, such as
other discounts on goods or services. IFRS 15 states that when an entity gives a customer the option to
obtain additional good s or services, this option is considered a separate executive obligation if it provides
the customer with a substantial right that he or she cannot obtain without a contract.[7]
Telecom customers in Azerbaijan often make changes in the services they receive. Customers can
increase or decrease packet data, add or delete some of the shared data packet, or add or delete services.
This results in frequent amendments to contracts. Accounting for contract changes has the potential to be a
very complex issue for telecom companies. This is due to the fact that customers often change their
contracts and can choose one of the different offers. Most of the changes to the telecom contracts were
either prospective, such as a new contract, or the cancellation of an old one and the creation of a new one.
The table below shows the impact of the application of the standard on the financial results of Azercell
Telecom MMC in 2017. [8]
Table 4: Changes in revenues as a result of the application of the new standard (telecommunications sector)
Enterprises
IAS 18
IFRS 15
Difference (in
manats)
Difference (in
%)
Azercell Telecom
MMC
411,441,000
417,646,000
6,205,000
1.5%
The main reason for the increase in revenue in this enterprise is the recognition of income for the
items offered free of charge as part of the package, as required by the new standard. Another major reason
for the change is the change in factors taken into account in calculating the completion rate.
Telecommunications companies often offer incentives such as free products or services to attract new
customers. For example, businesses often give them free tablets, TVs, a free monthly service, or a free
premium to sell services to new customers. Under the new standard, these free services are evaluated to
determine whether they represent the goods and services promised under the contract and whether there are
separate performance obligations. As a result, these services are considered in most regulations as promised
goods or services. In addition, these services are accounted for as separate performance obligations because
they are able to be different and also because they are different in the context of the contract.
Conclusion
Enterprises operating in most parts of the world, including many enterprises in Azerbaijan, have
started to apply a new standard for accounting for income, starting from the reporting year, which began on
January 1, 2018.
The new income approach has had significant financial implications. The new standard is more
comprehensive than the previous standard and is less open to manipulation, which will increase the
confidence of investors and other financial statement users through more accurate and transparent profit or
loss and balance sheet figures.

THE SUSTAINABLE DEVELOPMENT OF ECONOMY AND ADMINISTRATION: PROBLEMS AND PERSPECTIVES
240
Literature
1. IFRS 15 Revenue from Contracts with Customers
2. Ernst & Young (2019a), A Close Look at the New Income Recognition Standard: EGYM Limited,
UK, p.578.
3. PWC, (2017a), Income from Customer Contracts, London, United Kingdom, p. 285.
4. IFRS 15
5. SOCAR, Consolidated Financial Statement prepared under IFRS, 31.12.2018
https://socar.az/socar/assets/documents/en/socar-financial reports/Financial%20report%202018.pdf,
01.01.2021
6. Azersun Holding LLC, Consolidated Financial Statement prepared under IFRS
https://www.azersun.com/aboutcompany/financialreports/, 01.01.2021
7. Ernst & Young (2015c), New Standards for Income Recognition - Retail and Consumer Products,
EGYM Limited, London, UK, p. 35.
8. Azercel LLC, Consolidated Financial Statement prepared under IFRS
https://www.azercell.com/az/about-us/press-releases/financial-report.html, 01.01.2021
9. AZFEN LLC, Consolidated Financial Statement prepared under IFRS, http://azfen.com/about-
us/statistics,
10. NORM LLC, https://www.norm.az/governance/Finance/,
11. Caspian Drilling Company LLC, Consolidated Financial Statement prepared under IFRS,
https://caspiandrilling.com/uploads/file/A1%20IFRS%20FS%202018-2017_ENG_formatted.pdf,
01.01.2021
Beynəlxalq Mühasibat Təhsil Standartlarının əhəmiyyəti
Nərmin Hacıyeva
Bakı Mühəndislik Universiteti
İstehsal sferasında mühasibat uçotu və audit ixtisasının magistr tələbəsi
nhaciyeva2@std.beu.edu.az
Elsevər İbadov
Bakı Mühəndislik Universiteti
eibadov@beu.edu.az
XÜLASƏ
Dünyada vacib yer tutan mühasibatlıq peşəsi dayanmadan inkişaf edir. Daima yenilənən iqtisadi,
texnoloji inkişafla ölkələr beynəlxalq rəqabət səviyyəsinə çatmış və mühasibatlıq peşəsinin də inkişafı
beynəlxalq əhəmiyyət qazanmışdır. Sürətli dəyişiklik mühasiblərin perspektivlərini dəyişir. İnkişaflara
uyğunlaşmaq üçün ən önəmli faktor təhsildir. Mühasiblərin dəyişiklik prosesi ilə uyğunlaşa bilməsi üçün
peşəkar bilik, bacarıq və planlı ixtisas sahibi olmaq tələb olunur. Beynəlxalq Mühasibat Təhsil
Standartlarının (IES) hədəfi mühasibat təhsilində keyfiyyətin artırılması, davamlı olaraq inkişaf
etdirilməsidir. Beynəlxalq mühasiblər federasiyası (IFAC) səkkiz beynəlxalq mühasibat təhsili standartını
nəşr etmişdir. Beynəlxalq Mühasibat Təhsil Standartlarının əsas məqsədi mühasiblik peşəsini öyrətmək,
təcrübə və təlimləri əhatə edərək inkişaf etdirməkdir. Bu standartlarda mühasibat peşəsinin karyera prosesi,
təhsili, praktiki təcrübəsi, imtahan mərhələləri əks olunmuşdur.
Açar sözlər: Peşəkar mühasibat təhsili, Beynəlxalq mühasibat tədris standartları.
Abstract
The accounting profession, which occupies an important place in the world, is constantly evolving.
With the advancement of economic and technological development, countries have reached the level of
international competition, and the accounting profession has gained international importance. Rapid change
is altering the perspectives of accountants. The most important thing to adjust to development is education.
Professional knowledge, skills, and qualifications are required for accountants to be able to adapt to the
change process. The International Accounting Education Standards Board is committed to the