Discuss Weaknesses of Revenue Recognition principle in IAS 18 Revenue and IAS 11 and evaluate how IFRS 15 could rectify some of the weaknesses

3. Effective from 1 January 2018, the revenue recognition standards, IAS 18 Revenue and IAS 11 Construction Contracts, will be superseded by IFRS 15 Revenue from Contracts with Customers because IAS 18 Revenue and IAS 11 Construction Contracts can be difficult to understand and apply. In addition, IAS 18 provides limited guidance on important topics such as revenue recognition for multiple-element arrangements. (see, Ernst & Young, 2012) Required: (a) Discuss the weaknesses of revenue recognition principle in IAS 18 Revenue and IAS 11 Construction Contracts which might have contributed to earnings management and fraudulent financial reporting. [30 marks] (b) Evaluate how IFRS 15 Revenue from Contracts with Customers which was issued in May 2014 could rectify some of these weaknesses. [20 marks] 3. Effective from 1 January 2018, the revenue recognition standards, IAS 18 Revenue and IAS 11 Construction Contracts, will be superseded by IFRS 15 Revenue from Contracts with Customers because IAS 18 Revenue and IAS 11 Construction Contracts can be difficult to understand and apply. In addition, IAS 18 provides limited guidance on important topics such as revenue recognition for multiple-element arrangements. (see, Ernst & Young, 2012) Required: (a) Discuss the weaknesses of revenue recognition principle in IAS 18 Revenue and IAS 11 Construction Contracts which might have contributed to earnings management and fraudulent financial reporting. [30 marks] (b) Evaluate how IFRS 15 Revenue from Contracts with Customers which was issued in May 2014 could rectify some of these weaknesses. [20 marks]