📖 Overview
This standard establishes a five-step model for revenue recognition: (1) identify the contract with the customer, (2) identify performance obligations, (3) determine the transaction price, (4) allocate the transaction price to performance obligations, (5) recognize revenue when (or as) each performance obligation is satisfied.
🎯 Scope
This standard applies to all contracts with customers, except:
- Lease contracts (IFRS 16).
- Financial instruments (IFRS 9).
- Insurance contracts (IFRS 17).
- Non-monetary exchanges between entities in the same line of business.
The standard covers sale of goods, rendering of services, construction contracts, and licenses.
⚙️ Key Principles
**Five-Step Model for Revenue Recognition:**
1. **Identify the contract with the customer**: An agreement that creates enforceable rights and obligations.
2. **Identify performance obligations**: Promises to transfer distinct goods or services to the customer.
3. **Determine transaction price**: The amount the entity expects to be entitled to in exchange for transferring goods or services.
4. **Allocate transaction price**: Distribute the transaction price to each performance obligation based on standalone selling prices.
5. **Recognize revenue**: When (or as) each performance obligation is satisfied.
📏 Measurement
**Transaction price includes:**
- Fixed amount.
- Variable consideration: discounts, refunds, incentives, performance bonuses.
- Constraint on variable consideration: recognized only if it is highly probable that no significant revenue reversal will occur.
- Significant financing component: if the timing difference between payment and transfer is significant.
- Non-cash consideration: measured at fair value.
- Consideration payable to the customer.
✅ Recognition
Revenue is recognized when (or as) the supplier satisfies a performance obligation by transferring control of the good or service to the customer.
**Control transfer can be:**
- **At a point in time**: e.g., selling a product in a store.
- **Over time**: e.g., service or construction contracts.
**Criteria for over-time recognition**:
1. Customer receives and consumes benefits simultaneously.
2. Customer controls the asset as it is created.
3. Supplier has a right to payment for work completed.
📊 Presentation
**On the Statement of Financial Position:**
- **Contract Asset**: Entity's right to consideration for services transferred (not yet invoiced).
- **Contract Liability**: Entity's obligation to transfer services (advance payment received).
- **Receivable**: Entity's unconditional right to consideration (invoice issued).
**On the Income Statement:**
- Revenue is presented as a separate line item.
- Related contract costs are disclosed.
📝 Disclosure Requirements
Disclosures required:
- Revenue recognized from customer contracts, classified by revenue type (goods, services, contracts).
- Contract assets and liabilities (opening and closing balances).
- Remaining performance obligations (value of unfulfilled contracts).
- Key judgments and estimates used.
- Capitalized contract acquisition and fulfillment costs.
🔗 Related Standards
IFRS 9 (Financial Instruments), IFRS 16 (Leases), IAS 1 (Presentation of Financial Statements), IAS 37 (Provisions)