IFRS 15 REVENUE FROM CONTRACTS WITH

CUSTOMERS

FIVE-STEP MODEL FRAMEWORK

1.Identify the contract(s) with a customer

2.Identify the performance obligations in the contract
3.Determine the transaction price
4.Allocate the transaction price to the performance
obligations in the contract
5.Recognize revenue when (or as) the entity satisfies a
performance obligation.
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
1.Identify the contract(s) with a customer
A contract with a customer will be within the scope of IFRS 15 if all
the following conditions are met: [IFRS 15:9]
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
1.Identify the contract(s) with a customer
A contract with a customer will be within the scope of IFRS 15 if all
the following conditions are met: [IFRS 15:9]
a. the contract has been approved by the parties to the
contract;
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
1.Identify the contract(s) with a customer
A contract with a customer will be within the scope of IFRS 15 if all
the following conditions are met: [IFRS 15:9]
a. the contract has been approved by the parties to the
contract;
b. each party’s rights in relation to the goods or services to
be transferred can be identified;
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 1: Identify the contract(s) with a customer
A contract with a customer will be within the scope of IFRS 15 if all
the following conditions are met: [IFRS 15:9]
a. the contract has been approved by the parties to the
contract;
b. each party’s rights in relation to the goods or services to
be transferred can be identified;
c. the payment terms for the goods or services to be
transferred can be identified;
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
1.Identify the contract(s) with a customer
A contract with a customer will be within the scope of IFRS 15 if all
the following conditions are met: [IFRS 15:9]
a. the contract has been approved by the parties to the
contract;
b. each party’s rights in relation to the goods or services to
be transferred can be identified;
c. the payment terms for the goods or services to be
transferred can be identified;
d. the contract has commercial substance; and
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
1.Identify the contract(s) with a customer
A contract with a customer will be within the scope of IFRS 15 if all
the following conditions are met: [IFRS 15:9]
a. the contract has been approved by the parties to the
contract;
b. each party’s rights in relation to the goods or services to
be transferred can be identified;
c. the payment terms for the goods or services to be
transferred can be identified;
d. the contract has commercial substance; and
e. it is probable that the consideration to which the entity
is entitled to in exchange for the goods or services will
be collected.
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
1. Identify the contract(s) with a customer
A contract with a customer will be within the scope of IFRS 15 if all the following
conditions are met: [IFRS 15:9]
a. the contract has been approved by the parties to the contract;
b. each party’s rights in relation to the goods or services to be transferred
can be identified;
c. the payment terms for the goods or services to be transferred can be
identified;
d. the contract has commercial substance; and
e. it is probable that the consideration to which the entity is entitled to in
exchange for the goods or services will be collected.

If a contract with a customer does not yet meet all of the above criteria, the entity
will continue to re-assess the contract going forward to determine whether it
subsequently meets the above criteria. From that point, the entity will apply IFRS 15
to the contract. [IFRS 15:14]
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 2: Identify the performance obligations in the contract
At the inception of the contract, the entity should assess the goods
or services that have been promised to the customer, and identify
as a performance obligation: [IFRS 15.22]
• a good or service (or bundle of goods or services) that is distinct;
or
• a series of distinct goods or services that are substantially the
same and that have the same pattern of transfer to the
customer.
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 3: Determine the transaction price

The transaction price is the amount to which an entity

expects to be entitled in exchange for the transfer of
goods and services. When making this determination, an
entity will consider past customary business practices.
[IFRS 15:47]
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 3: Determine the transaction price
Where a contract contains elements of variable
consideration, the entity will estimate the amount of
variable consideration to which it will be entitled under
the contract. [IFRS 15:50] Variable consideration can
arise, for example, as a result of discounts, rebates,
refunds, credits, price concessions, incentives,
performance bonuses, penalties or other similar items.
Variable consideration is also present if an entity’s right to
consideration is contingent on the occurrence of a future
event. [IFRS 15:51]
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 4: Allocate the transaction price to the performance
obligations
Where a contract has multiple performance obligations, an entity
will allocate the transaction price to the performance obligations in
the contract by reference to their relative standalone selling prices.
[IFRS 15:74] If a standalone selling price is not directly observable,
the entity will need to estimate it. IFRS 15 suggests various
methods that might be used, including: [IFRS 15:79]
• Adjusted market assessment approach
• Expected cost plus a margin approach
• Residual approach
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 5: Recognize revenue when the entity
satisfies a performance obligation

Revenue is recognized as control is passed, either over

time or at a point in time. [IFRS 15:32]
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
An entity recognizes revenue over time if one of the
following criteria is met: [IFRS 15:35]
• the customer simultaneously receives and
consumes all of the benefits provided by the
entity as the entity performs;
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
An entity recognizes revenue over time if one of the
following criteria is met: [IFRS 15:35]
• the customer simultaneously receives and
consumes all of the benefits provided by the
entity as the entity performs;
• the entity’s performance creates or enhances an
asset that the customer controls as the asset is
created; or
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
An entity recognizes revenue over time if one of the
following criteria is met: [IFRS 15:35]
• the customer simultaneously receives and
consumes all of the benefits provided by the
entity as the entity performs;
• the entity’s performance creates or enhances an
asset that the customer controls as the asset is
created; or
• the entity’s performance does not create an
asset with an alternative use to the entity and
the entity has an enforceable right to payment
for performance completed to date.
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 5: Recognize revenue when the entity satisfies a
performance obligation

If an entity does not satisfy its performance obligation over

time, it satisfies it at a point in time. Revenue will therefore be
recognized when control is passed at a certain point in time.
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 5: Recognize revenue when the entity satisfies a
performance obligation

Factors that may indicate the point in time at which control

passes include, but are not limited to: [IFRS 15:38]
• the entity has a present right to payment for the
asset;
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 5: Recognize revenue when the entity satisfies a
performance obligation

Factors that may indicate the point in time at which control

passes include, but are not limited to: [IFRS 15:38]
• the entity has a present right to payment for the
asset;
• the customer has legal title to the asset;
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 5: Recognize revenue when the entity satisfies a
performance obligation

Factors that may indicate the point in time at which control

passes include, but are not limited to: [IFRS 15:38]
• the entity has a present right to payment for the
asset;
• the customer has legal title to the asset;
• the entity has transferred physical possession of the
asset;
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 5: Recognize revenue when the entity satisfies a
performance obligation

Factors that may indicate the point in time at which control

passes include, but are not limited to: [IFRS 15:38]
• the entity has a present right to payment for the
asset;
• the customer has legal title to the asset;
• the entity has transferred physical possession of the
asset;
• the customer has the significant risks and rewards
related to the ownership of the asset; and
 IFRS 15 REVENUE FROM CONTRACTS WITH
CUSTOMERS
STEP 5: Recognize revenue when the entity satisfies a
performance obligation

Factors that may indicate the point in time at which control passes
include, but are not limited to: [IFRS 15:38]
• the entity has a present right to payment for the asset;
• the customer has legal title to the asset;
• the entity has transferred physical possession of the
asset;
• the customer has the significant risks and rewards
related to the ownership of the asset; and
• the customer has accepted the asset.