Why IDP Education Is Changing When It Recognises Revenue Across Markets
IDP Education has updated its revenue recognition policy to recognise Student Placement revenue at census date across all jurisdictions, leading to restated FY25 financials and reaffirmed FY26 guidance.
- Voluntary change to revenue recognition timing for Australia and UK
- FY25 revenue and net profit after tax increased by $9.2m and $5.2m respectively
- Net assets and equity decreased by $68.8m due to shorter contract asset periods
- FY26 revenue and Adjusted EBIT expected to decline by approximately $2m
- FY26 Adjusted EBIT guidance of $115m-$125m reaffirmed despite accounting change
A Shift in Revenue Recognition
IDP Education Limited (ASX, IEL), a global leader in international student placement, has announced a voluntary change to its revenue recognition accounting policy. The company will now recognise Student Placement revenue at census date across all jurisdictions, aligning Australia and the UK with Canada, the United States, Ireland, and New Zealand. This change, effective for FY26 reporting, also involves restating FY25 comparatives where appropriate.
Financial Impact on FY25
The updated policy results in revenue being recognised later for Australia and the UK compared to previous practice. For FY25, this shift has led to an increase in reported revenue by $9.2 million and a net profit after tax uplift of $5.2 million. However, the balance sheet reflects a decrease in net assets and equity by $68.8 million as at 30 June 2025, primarily due to a shorter duration of contract assets on the books. This reduction also includes a retrospective adjustment to retained earnings.
Consistency Across Markets
Previously, IDP recognised revenue upon Electronic Confirmation of Enrolment (eCOE) in Australia and Confirmation of Acceptance of Studies (CAS) in the UK, while other countries recognised revenue at census date. The policy update acknowledges evolving performance obligations, with students now requiring more support to arrive and commence their courses, justifying a more consistent and arguably more accurate revenue recognition approach.
Guidance and Operational Outlook
Despite the accounting change, IDP reaffirms its FY26 Adjusted EBIT guidance of $115 million to $125 million. The policy shift is expected to reduce FY26 revenue and Adjusted EBIT by approximately $2 million but is not anticipated to affect operating cash flows, capital management, or banking covenants. This suggests that while accounting figures will shift, the underlying business performance and cash generation remain stable.
Looking Ahead
This move towards uniform revenue recognition reflects broader trends in the education placement sector, where companies are adapting to more dynamic market conditions and evolving customer needs. For investors, the restated FY25 figures provide a clearer baseline for assessing IDP’s performance, while the reaffirmed guidance offers reassurance amid accounting changes.
Bottom Line?
IDP’s accounting update clarifies revenue timing but leaves operational momentum intact as FY26 guidance stands firm.
Questions in the middle?
- How will the later revenue recognition affect IDP’s quarterly earnings volatility in FY26?
- What operational changes, if any, will IDP implement to support the increased student assistance reflected in the new policy?
- Could this accounting alignment influence how competitors in the international education sector report revenue?