IFRS 15 Revenue

Practical guidance and support on IFRS 15

Our experienced team provides practical advice and support on all aspects of IFRS 15, helping organisations understand and apply the requirements of the standard in practice.

We support clients across a wide range of sectors with matters including identifying performance obligations, determining transaction prices, assessing the timing of revenue recognition and addressing complex contractual arrangements.

For more about how we can help, visit our financial reporting solutions page.

Overview of IFRS 15 ‘Revenue from Contracts with Customers’

IFRS 15 ‘Revenue from Contracts with Customers’ establishes a comprehensive framework for recognising revenue arising from contracts with customers.

The standard is built around a five-step model designed to ensure revenue is recognised in a way that reflects the transfer of promised goods or services to customers.

The core principle of IFRS 15 is that revenue should be recognised in an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. Revenue is recognised when, or as, control of those goods or services transfers to the customer.

Although IFRS 15 is now widely applied, many organisations continue to face practical challenges in areas such as identifying performance obligations, estimating variable consideration and determining whether revenue should be recognised over time or at a point in time.

Key areas of focus under IFRS 15

The five-step revenue model

IFRS 15 requires entities to apply the following five steps when recognising revenue:

1. Identify the contract 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
5. Recognise revenue when (or as) each performance obligation is satisfied

Performance obligations

Entities must identify the distinct goods or services promised in a contract and determine which represent separate performance obligations. This assessment can require judgement where contracts include multiple deliverables.

Variable consideration

Contracts may include discounts, rebates, incentives, performance bonuses or rights of return. Entities must estimate the amount of variable consideration and determine the extent to which it can be recognised as revenue.

Timing of revenue recognition

Revenue is recognised either over time or at a point in time, depending on when control of the promised goods or services transfers to the customer.

Industry-specific considerations

While the principles of IFRS 15 apply across all sectors, the practical application of the standard can vary depending on the nature of an organisation’s contracts and business model.

Certain industries frequently encounter more complex revenue recognition considerations, for example:

• Technology and software – contracts may include licences, implementation services, upgrades and ongoing support. Revenue recognition requires careful identification of distinct performance obligations and allocation of transaction price across multiple deliverables
• Construction and engineering – long-term contracts often involve multiple deliverables and milestones. Revenue recognition may require assessing progress towards completion, milestone billing, or applying the percentage-of-completion method under IFRS 15
• Real estate and property development – revenue may be recognised at handover, on practical completion, or over time depending on contract terms, stage of construction and when control of the property passes to the buyer
• Real estate and property development – revenue may be recognised at handover, on practical completion, or over time depending on contract terms, stage of construction and when control of the property passes to the buyer
• Financial services – accounting for various fees and commissions, such as management fees, performance fees, carried interest, trail commissions, placement fees, up-front fees and claims handling fees

IFRS 15 insights and publications

The following guides and publications provide useful information and advice on IFRS 15:

IFRS at a Glance – IFRS 15 Revenue from Contracts with Customers
A concise guide summarising the key requirements of the five-step revenue model, including scope, key definitions and available practical expedients.

IFRS in Practice - IFRS 15 Revenue from Contracts with Customers
A detailed publication explaining the five-step model and providing practical guidance and examples on applying IFRS 15 in areas such as licensing, variable consideration and sales with a right of return.

How we can help

Our specialists support organisations with a wide range of IFRS 15 related matters, including:

• Assessing revenue recognition under the five-step model
• Identifying performance obligations within complex contracts
• Advising on variable consideration and transaction price allocation
• Evaluating the effect of contract combination, separation and modification
• Evaluating the effect of contract combination, separation and modification
• Allocating transaction prices and discounts to performance obligations
• Considering the interplay of IFRS 9 ‘Financial Instruments’ and IFRS 15 with respect to impairment?
• Structuring the terms of a revenue contract to obtain a desired accounting outcome
• Supporting the implementation of IFRS 15 processes and controls

If you would like to discuss a specific revenue recognition issue or understand how IFRS 15 applies to your contracts, our specialists would be happy to help. Please contact our team to arrange a discussion.

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