THE IMPACT OF IFRS ON EXPENSE RECOGNITION AND THE RELATIONSHIP BEETWEEN THE ACTIVITY-BASED COSTING (ABC) ACCOUNTING SYSTEM AND THE ALLOCATION OF INDIRECT COSTS

Abstract

The IFRS 15 standard „Revenue from contracts with customers“ regulates how costs associated with contracts with customers should be recognized. This standars was adopted to eliminate shortcomings of the previous standards. IFRS 15 ensures consistency, comparibility and reliability of information. This standard explicitly specifies that contract performance costs must be recognozed as expenses when they are incurred. Activity-based costing (ABC) accounting systems are an advanced management accounting tool that contribute to optimize costs and increase operational efficiency. The core of this method is the allocation of indirect costs according to cost drivers. The implementation of the ABC method requires a large amount of data, challenging integration and accurate selection of cost drivers. The study intended to determine the relationship between IFRS 15 and the ABC method in ensuring reliable allocation of indirect costs in the company. The following methods were used to conduct the analysis: synthesis and analysis of scientific literature, aggregation and comparison, data grouping and systemization, empirical quantitative research method – survey. According to experts, the implementation of IFRS 15 and the ABC method allows for a more accurate allocation of indirect costs, optimization of costs calculation and accept more effective management decisions. Although the implementation of the ABC method requires additional times and financial resources, relantioship with IFRS 15 improves data quality. In conclusion the results of the study, it can be inferred that the execution of both methods ensures the reliability of financial information and cost management.