IFRS 15 Revenue from Contracts with Customers

IFRS 15 (here is the full standard) establishes a single and comprehensive framework which sets out how much revenue is to be recognised, and when. The core principle is that a vendor should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor excepts to be entitled in exchange for those goods and services.

STEP 1 Identify the Contract

Combination of contracts
Contract modifications
Costs to fulfil a contract
Contract enforceability and termination clauses

Specific topics:
– Reassessment of the five identification criteria IFRS 15
– Engineering and Construction: Identify the contract with the customer
– Arrangements where the identification criteria are not met
– Assessing collectibility for a portfolio of contracts
– Contract extensions
– Product delivered without a written contract
– Identifying the customer or collaborative arrangement
– Arrangements with multiple parties
– Revenue not from a contract with a customer
– What are enforceable contracts with customers?

STEP 2 Identify performance obligations

Distinct goods or services,
Promises in a contract,

Series provision,
Implicit promises in a contract,

Specific topics:
Automotive: Long-term supply contracts,
– Software and cloud services: Performance obligations,
– Engineering and Construction: Identify the performance obligations in the contract
– What does a performance obligation look like?

STEP 3 Determine the transaction price

Variable consideration,
Refund liabilities,
Repurchase options and residual value guarantees,
– Dealer sales vehicles incentives,
– Construction warranties,
Constraining estimates of variable consideration,

Sales- and usage-based royalties,
The existence of a significant financing component in the contract,
– Example Financing component,

Non-cash consideration,
Consideration payable to a customer.

Specific topics:
Engineering and Construction: Determine the transaction price

STEP 4 Allocating the Transaction Price to Performance Obligations

Allocating the transaction price based on the stand-alone selling price,
Allocating discounts,
Allocation of variable consideration.

Specific topics:
Engineering and Construction: Allocate the transaction price to the performance obligations

STEP 5 Recognise revenue when each performance obligation is satisfied

Performance obligation/Revenue satisfied over time
– (No) alternative use,
Enforceable right to payment for performance completed to date,
Measuring progress toward complete satisfaction of a performance obligation,

Output method,
Input method,
Revenue recognition at a point in time.

Specific topics:
Engineering and Construction: Recognise revenue when (or as) satisfying each performance obligation


Revenue from contracts with customers – Overview
Options to purchase additional goods or services
Disaggregation of revenue
Contract assets and contract liabilities
Onerous contracts
Service or insurance contract?
Extra disclosures IFRS 15
Transition to new IFRS 15 Disclosures
Engineering and Construction: From IAS 11 to IFRS 15
Engineering and Construction: Contract costs