Post: Data#3 announces change to accounting policy for indirect software revenue recognition following ASIC review

Data#3 Limited (Data3) has announced the restatement of its full year 2023 and half year 2022 financial reports following a review initiated as part of ASIC’s new financial reporting and audit surveillance program.

ASIC raised concerns with Data3 regarding its revenue accounting policy in November 2023. Data3 subsequently changed its accounting policy to recognise revenue from contracts for the sale of some software products as an agent rather than a principal (under Australian Accounting Standard AASB 15 Revenue from Contracts with Customers). Accordingly, only net earnings on those sales are recognised as revenue.

The restatement (arising from the change in accounting policy) resulted in a $1.67 billion decrease to revenue for the year ended 30 June 2023 and a $761 million decrease to revenue for the half year to 31 December 2022. There is no impact to profit before tax due to the offsetting expense being eliminated when the revenue is no longer recognised.

Under its new financial reporting and audit surveillance program, ASIC targets financial reports for review using risk-based criteria. These include where ASIC identifies potential issues in revenue recognition or asset valuation.

ASIC reminds preparers of financial reports that consideration should be given to identifying whether revenue (performance obligations) should be recognised as a principal or as an agent. When an entity acts as an agent and recognises all the revenue in relation to a product or service it on-sells, it can create a misleading impression about the size of a business and the potential influence it has on its own profitability.

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