Arrangements where the identification criteria are not met

An arrangement is not accounted for using the five contract identification criteria until all of the criteria are met. Management will need to reassess the arrangement at each reporting period to determine if the criteria are met.

Sales- and usage-based royalties

When an entity earns royalties based on the extent to which a customer uses or benefits (through onward sales) from a license of Intellectual Property (IP), it has transferred control of the IP to its customer, with uncertainty over the amount of consideration (i.e. the consideration is variable). As an exception to the general principles in IFRS 15 that revenue is recognised when control of a good or service has been transferred to a customer and measured at an amount … Continue reading

STEP 5 Recognise revenue when each performance obligation is satisfied

Revenue is recognised when (or as) goods or services are transferred to a customer. A vendor satisfies each of its performance obligations (that is, it fulfils its promises to the customer) by transferring control of the promised good or service underlying that performance obligation to the customer.

In the past requirements for revenue recognition (IAS 18 Revenue) were based around an assessment of whether the risks and rewards of ownership of a good or service had been transferred to … Continue reading

Reassessment of the five identification criteria IFRS 15

A reassessment of the five identification criteria is only necessary when concerns arise from a change in facts and circumstances that is considered to be significant. So an entity is not always required to reassess whether an existing contract meets the five identification criteria.

If and when the reassessment results in the collectability criterion not being met, the entity is precluded from continuing to recognise revenue under the contract until collectability returns to become probable and the five identification criteria … Continue reading