IFRS 15 Revenue from Contracts with Customers is an accounting standard issued by the International Accounting Standards Board and was introduced in 2018 with the goal of bringing transparency to revenue recognition. Its core principle is that organisations should recognise revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration it expects to receive.
IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer.
IFRS 15 requires entities to apply the following five steps:
- Identification of the contract(s) with a customer.
- Identifying the performance obligations in the contract. Performance obligations are promises in a contract to transfer to a customer goods or services that are distinct.
- Transaction price determination. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to a customer.
- Transaction price allocation to each performance obligation on the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract.
- Recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service).
Factsheet
IFRS15 was developed and brought into force from 2018 to bring transparency to revenue recognition. Its business impact goes far beyond the finance function, so our practitioners work closely with firms to where the latest technologies can help them deliver compliance as efficiently as possible.
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