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The forthcoming international financial reporting standard on revenue recognition won’t have an impact on how aerospace and defense companies do business, a Moody’s analyst told Bloomberg BNA April 27.
Jeanine Arnold, Moody’s vice president and senior credit officer, said the primary impacts of IFRS 15: Revenue from Contracts with Customers, on the aerospace and defense industries would be seen in how profit and loss are reported, not on cash flows.
As a result, total revenues wouldn’t be affected.
Engine manufacturers such as Rolls Royce Holdings plc and Pratt & Whitney can generate substantial income from contracts for maintenance and parts sales after an engine is purchased.
Post-sales contracts can span several decades, Moody’s said.
“These types of contracts are a significant driver of cash flows, and it’s a credit strength,” Arnold said.
IFRS 15 takes effect for reporting periods starting on or after Jan. 1, 2018.
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