Transitioning from previous revenue recognition standards to IFRS 15 can be a complex process, particularly because IFRS 15 introduces a new comprehensive model for revenue recognition. The standard allows for two methods of transition: the full retrospective approach and the modified retrospective approach.

1. Full Retrospective Approach: Under the full retrospective approach, companies must apply IFRS 15 retrospectively to each prior reporting period presented, as if IFRS 15 had always been in effect. This requires restating prior period financial statements, which can be a complex and time-consuming process. Entities are permitted to use certain practical expedients outlined in the standard to simplify this process.
2. Potential difficulties may include the need for extensive historical data and significant time and resources to restate prior period financial statements. To mitigate these issues, entities may need to invest in technology or outside assistance, and they may need to start the transition process well in advance of the effective date.
3. Modified Retrospective Approach: Under the modified retrospective approach, IFRS 15 is applied only to contracts that are not completed as of the date of initial application, with the cumulative effect of initially applying the standard recognized at the date of initial application. This approach does not require restatement of prior period financial statements, but it does require additional disclosures about the impact of the change on each financial statement line item affected in the current reporting period.
4. Potential difficulties may include the need for dual tracking systems to capture data under both the old standards and IFRS 15 during the transition period. To overcome this challenge, entities may need to enhance their accounting systems or implement temporary manual processes.

The choice between these two approaches depends on a variety of factors, including the entity's specific circumstances, the resources available, the complexity of contracts, and the extent of the differences between the current accounting practices and IFRS 15. Regardless of the method chosen, early planning and project management will be essential for a successful transition.

Let's consider a hypothetical example of a software company named SoftTech Corp, transitioning from IAS 18 to IFRS 15.

Scenario:

SoftTech Corp has a contract with a client to deliver a software license, installation services, and post-delivery support for a total price of $600,000. Under IAS 18, SoftTech Corp recognized this as three separate components and recognized revenue as each component was delivered.

However, under IFRS 15, SoftTech Corp must assess whether these are distinct performance obligations. After analysis, it determines that while the software license and the support are distinct performance obligations, the installation service is not distinct because it is a part of setting up the software license.

Full Retrospective Approach:

If SoftTech Corp chooses the full retrospective approach, it must restate the previous years' financial statements as if IFRS 15 had always been in effect. This would mean reallocating the revenue between the software license (including installation) and the support service based on their relative standalone selling prices and recognizing the revenue for each obligation when (or as) control is transferred to the customer. This might change when the revenue was recognized and the amount of revenue recognized in each period, requiring restatement of prior period financial statements.

Modified Retrospective Approach:

If SoftTech Corp chooses the modified retrospective approach, it applies IFRS 15 to contracts that are not completed as of the date of initial application. Therefore, it would not need to restate the prior years' financial statements. However, it will need to provide additional disclosures about the impact of the change on each financial statement line item affected in the current reporting period.

Both methods will require SoftTech Corp to make significant judgments and estimates. It will need to allocate resources, and potentially seek external advice, to ensure that the transition to IFRS 15 is performed correctly and that its financial statements continue to present a true and fair view of its financial position and performance.