ACCA SBR INT Syllabus C. Reporting The Financial Performance Of A Range Of Entities - Discuss And Apply The Five Step Model Basics - Notes 2 / 8
Revenue Recognition - IFRS 15
When & how much to Recognise Revenue?
Here you need to go through the 5 step process…
Identify the contract(s) with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognise revenue when (or as) the entity satisfies a performance obligation
Before we do that though, let’s get some key definitions out of the way..
Key definitions
Contract
An agreement between two or more parties that creates enforceable rights and obligations.
Income
Increases in economic benefits during the accounting period in the form of increasing assets or decreasing liabilities
Performance obligation
A promise in a contract to transfer to the customer either:
- a good or service 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.
Revenue
Income arising in the course of an entity’s ordinary activities.
Transaction price
The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.