IFRS 15: Revenue from Contracts with Customers - KLiPs

IFRS 15: Revenue from Contracts with Customers – KLiPs

This KLiP introduces the 5-step process of revenue recognition in accordance with IFRS 15.

The 5 steps are:
1) Identifying the contract with the customer
2) Identifying the performance obligation in the contract
3) Determining the transaction price
4) Allocating the transaction price, and
5) Recognizing the revenue  


  1. Identify the contract with the customer
    Written or verbal contracts must meet 5 attributes:
    (i) Parties to a contract must have approved the contract and are committed to perform the obligations

(ii) Each party's rights to goods/services can be identified
(iii) The payment terms for goods/services can be identified

(iv) The contract has a commercial substance, and
(v) It is probable that an entity will collect the consideration

  1. Identify the performance obligations in the contract
    Determine if performance obligation is to be treated:
  • Separately, or
  • Distinctly
  1. Determine the transaction price

The transaction price can be determined by:

  • Variable consideration
  • Constraining estimates of variable consideration
  • The existence of a significant financing component in the contract
  • Non-cash consideration, and
  • Consideration payable to a customer
  1. Allocate the transaction price to the performance obligation in a contract
    Allocate the transaction price to each performance obligation that depicts the amount of consideration to which an entity expects to be entitled in exchange for transfer of goods/services to the customer. This can be done when you base the transaction price to a relative stand-alone selling price.

    Exceptions include:
  • Allocating discounts, and
  • Allocation of variable consideration
  1. Recognize the revenue when, or as, an entity satisfies a performance obligation
    This is determining when a performance obligation is satisfied.
    A performance obligation can be satisfied:
  • Over time, or
  • At a point of time

There are 5 exceptions to this standard. You do not apply IFRS 15 to:

  1. Lease contracts
  2. Insurance contracts
  3. Financial instruments
  4. Other contractual rights or obligations that belong to IAS 39 / IFRS 9, IFRS 10 and IFRS 11, IAS 27 and IAS 28
  5. Non-monetary exchanges between entities within the same business



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