REVENUE REPORTING AND

DISCLOSURE PRACTICES
A close study on James Hardie Industries plc

Prepared and submitted by:

Kamal Khadka
Contents
Executive Summary ...................................................................................................................................... 3
Background ................................................................................................................................................... 3
Accounting Standards and Regulations: ....................................................................................................... 3
Accounting Policy of James Hardie Industries plc ....................................................................................... 3
Analysis of Accounting Policies ................................................................................................................... 4
Evaluation of Current Accounting Treatment for the Recognition and Measurement of Revenue under
AASB15 ........................................................................................................................................................ 4
Evaluation ..................................................................................................................................................... 5
Conclusion: ................................................................................................................................................... 5
References:.................................................................................................................................................... 6
Appendices.................................................................................................................................................... 7

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Executive Summary

The main aim of this report is to analyze the financial statement of James Hardie Industries plc, a
listed company in Australia, mainly focusing the accounting policy adopted for revenue
recognition and its disclosure part and also a slight comparison of financial performance over the
previous year. The actual data from the company for relevant fiscal year forms the part and
foundation of this research.

Background

James Hardie Industries plc (JHI) is a global leader in the manufacture of fiber cement building
products. The company operates in three segments: North America Fiber Cement, Europe Fiber
Cement, and Asia Pacific Fiber Cement. JHI's products include exterior siding, interior panels,
flooring, and roofing products.

Revenue recognition and disclosure is an important aspect of financial reporting. It is the process
of identifying, measuring, and disclosing the revenue earned by a company. In this report, we will
discuss the revenue recognition and disclosure policies of JHI, including the accounting policies
that the firm follows in reporting, measuring, and disclosing its revenue.

Furthermore, we will evaluate the current accounting treatment for the recognition and
measurement of revenue under AASB15, the Australian Accounting Standards Board’s standard
on revenue from contracts with customers.

Accounting Standards and Regulations:

The Australian Securities and Investments Commission (ASIC) and the Australian Stock
Exchange (ASX) have issued accounting standards and regulations that govern revenue
recognition and disclosure by ASX-listed companies. These include the Generally Accepted
Accounting Principles (GAAP) as set by the Australian Accounting Standards Board (AASB) and
the Corporations Act 2001 (Cth). AASB 15, also known as Revenue from Contracts with
Customers, is the main standard that outlines the principles for the recognition, measurement, and
disclosure of revenue from contracts with customers. This standard requires companies to
recognize revenue only when they have transferred control of goods or services to customers and
to measure revenue at the transaction

Accounting Policy of James Hardie Industries plc

James Hardie Industries plc is an Australian-based company that operates in the building materials
industry. The company specializes in the manufacture and sale of fiber cement products such as
siding, trim, and flooring. JHIL's accounting policy for revenue recognition is based on the
Australian Accounting Standards Board’s standard on revenue from contracts with customers
(AASB15).

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AASB15 requires companies to recognize revenue when control of the goods or services has been
transferred to the customer. The standard defines control as the ability to direct the use of and
obtain substantially all of the remaining benefits from the goods or services. JHIL recognizes
revenue when control of the goods or services has been transferred to the customer, which is
generally when the goods are shipped or the services are rendered.

JHIL also has a policy of recognizing revenue based on the proportionate performance method.
This method is used when the company has an ongoing relationship with the customer and the
revenue is earned over time. The company recognizes revenue on a pro-rata basis over the period
of the contract.

In addition, JHIL has a policy of recognizing revenue based on the completion of performance
method. This method is used when the company has a contract with a customer that has multiple
performance obligations. The company recognizes revenue when each performance obligation is
completed.

Analysis of Accounting Policies

The accounting policy of JHIL is in line with the AASB15 standard on revenue from contracts
with customers. The company recognizes revenue when control of the goods or services has been
transferred to the customer. This is a common practice among companies in the building materials
industry.

The use of the proportionate performance method is also a common practice in the industry. This
method is used when the company has an ongoing relationship with the customer and the revenue
is earned over time. The pro-rata recognition of revenue over the period of the contract ensures
that the company is only recognizing revenue that has been earned.

The completion of performance method is also a common practice in the industry. This method is
used when the company has a contract with a customer that has multiple performance obligations.
The recognition of revenue when each performance obligation is completed ensures that the
company is only recognizing revenue that has been earned.

Evaluation of Current Accounting Treatment for the Recognition and Measurement of Revenue
under AASB15

The current accounting treatment for the recognition and measurement of revenue under AASB15
is consistent with JHI's revenue recognition policies. AASB15 requires that revenue be recognized
when it is realized or realizable and earned, which is consistent with JHI's policy. Additionally,
AASB15 requires that revenue from the sale of goods be recognized when title and risk of loss
have been transferred to the customer, which is consistent with JHI's policy.

In terms of measurement, AASB15 requires that revenue be measured at the fair value of the
consideration received or receivable, which is consistent with JHI's policy. Additionally, AASB15
requires that any costs incurred or to be incurred in respect of the transaction be measured reliably,
which is consistent with JHI's policy.

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Evaluation
According to the Australian Accounting Standards Board (AASB), revenue recognition is the
process of determining when and how revenue is recognized in the financial statements. This
process is important as it helps to ensure that revenue is recognized in a consistent and appropriate
manner, which helps to provide accurate and reliable financial information to users of the financial
statements. The AASB has issued several accounting standards that provide guidance on the
recognition and measurement of revenue, including AASB 15 Revenue from Contracts with
Customers.

James Hardie Industries plc follows the accounting policy of recognizing revenue when it is
earned, which means that revenue is recognized when the company has fulfilled its obligations
under the contract and the customer is able to use or consume the goods or services. According to
the company's annual report, revenue is recognized based on the percentage of completion method
for long-term construction contracts and on a gross basis for all other contracts. The percentage of
completion method is used to recognize revenue for long-term construction contracts as it provides
a more accurate reflection of the progress of the contract and the amount of revenue that has been
earned.

In addition to recognizing revenue, James Hardie Industries plc also discloses its revenue in its
financial statements. The company's annual report provides detailed information on revenue,
including revenue by segment, geographic location, and product line. This information is presented
in the income statement and is also disclosed in the notes to the financial statements. The company
also provides information on significant revenue transactions and revenue from related parties.

Overall, JHI's revenue recognition and disclosure policies are in line with the requirements of IFRS
and AASB. The company recognizes revenue when it is realized or realizable and earned, which
is consistent with the definition of revenue in IFRS.

Conclusion:

In conclusion, James Hardie Industries plc follows the accounting policy of recognizing revenue
when it is earned, which is in line with the guidance provided by the AASB. The company also
provides detailed information on revenue in its financial statements, which helps to provide users
of the financial statements with a clear understanding of the company's revenue streams. In the
following sections of this report, we will provide an analysis of James Hardie Industries plc's
revenue recognition and disclosure policies, and evaluate the current accounting treatment for the
recognition and measurement of revenue under AASB15.

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References:

Australian Accounting Standards Board. (2017). AASB 15 Revenue from Contracts with
Customers. Retrieved from
https://d1io3yog0oux5.cloudfront.net/_4725d8890604c3d4011a8a546d33e381/jameshardie/db/1
172/10726/annual_report/Annual+Report+FY21+FINAL.pdf

James Hardie Industries plc. (2019). Annual Report. Retrieved from

https://www.jameshardie.com/~/media/Files/J/James-Hardie-IR/annual-reports/2019-jhi-annual-
report.pdf

KPMG. (2019). AASB 15 Revenue from Contracts with Customers: A practical guide. Retrieved
from https://home.kpmg/au/en/home/insights/2019/06/aasb-15-revenue-from-contracts-with-
customers-a-practical-guide.html

Barua, A., & Balsmeier, P. (2018). The impact of AASB 15 on revenue recognition in the
construction industry. Journal

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Appendices

1. Consolidated Statement of Financial Position

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 2. Consolidated statement of operation and other comprehensive income

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