Revenue recognition disclosure quality in the financial statements of Dutch construction companies

This study focuses on the revenue recognition disclosure quality of Dutch construction companies for a sample of both IFRS and Dutch GAAP applying companies. Attention is paid to the quality of the disclosures of significant judgements and estimates for IFRS issuers before and after the implementation of IFRS 15. Furthermore, a baseline measurement on the revenue recognition disclosures required by Dutch Accounting Standards (‘DAS’) 221 and 270 has been performed on the Dutch GAAP sample. We discuss also the forthcoming changes in these standards which will become effective for financial reporting years starting as per 1 January 2022. This study finds that overall the quality of disclosure of significant judgements and estimates related to the revenue recognition improved after the implementation of IFRS 15. Also, IFRS issuers provide relatively more useful disclosures than DAS issuers. In an analysis of the amendments of DAS 221 we observed that no additional disclosures were introduced regarding newly introduced concepts (such as performance obligations and variable considerations). We deem this an important area for improvement. Furthermore, this study investigated the expected impact of changes in the presentation requirements of DAS 221 and DAS 270. Particularly companies need to closely monitor the implications of the amendments on solvency metrics relevant for financing arrangements.