IFRS 15 *Revenue from Contracts with Customers* establishes a single, principles-based framework for recognising revenue from contracts with customers. The core principle is that an entity should recognise revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange (IFRS 15.2). This is achieved through a structured five-step model.

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Step 1 — Identify the Contract with a Customer (IFRS 15.9–16)

A contract must be approved by all parties, have identifiable rights and payment terms, have commercial substance, and collection must be probable. If these criteria are not met, revenue recognition is restricted until they are satisfied or specific conditions in IFRS 15.15 apply.

Step 2 — Identify the Performance Obligations (IFRS 15.22–30)

A performance obligation is a promise to transfer either a distinct good or service, or a series of distinct goods or services that are substantially the same. A good or service is distinct if the customer can benefit from it on its own (capable of being distinct) AND it is separately identifiable from other promises in the contract (distinct within the contract context — IFRS 15.27).

Step 3 — Determine the Transaction Price (IFRS 15.47–72)

The transaction price is the amount of consideration an entity expects to be entitled to. Key considerations include:

• Variable consideration — estimated using expected value or most likely amount, subject to the constraint that revenue is recognised only to the extent that a significant reversal is highly unlikely (IFRS 15.56–58).
• Significant financing components — adjustment required if the timing of payment provides a significant financing benefit (IFRS 15.60–65), with a practical expedient for contracts under 12 months (IFRS 15.63).
• Non-cash consideration and consideration payable to the customer must also be factored in (IFRS 15.66–72).

The transaction price is allocated to each performance obligation based on relative standalone selling prices (SSP). If the SSP is not directly observable, it must be estimated using methods such as adjusted market assessment, expected cost plus margin, or residual approach (IFRS 15.79).

Step 5 — Recognise Revenue When (or As) Performance Obligations Are Satisfied (IFRS 15.31–45)

Revenue is recognised either:

• Over time — if one of three criteria is met: the customer simultaneously receives and consumes the benefits, the entity's performance creates or enhances an asset the customer controls, or the asset has no alternative use and the entity has an enforceable right to payment for performance to date (IFRS 15.35).
• At a point in time — if none of the above criteria are met, with indicators including transfer of legal title, physical possession, and transfer of risks and rewards (IFRS 15.38).

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Additional Key Requirements

• Contract costs such as incremental costs of obtaining a contract (e.g., sales commissions) are capitalised and amortised if recoverable, subject to a practical expedient for assets that would amortise within 12 months (IFRS 15.91–95).
• Extensive disclosure requirements apply, including disaggregation of revenue, contract balances, and remaining performance obligations (IFRS 15.110–129).

The model applies across virtually all industries, with specific application guidance for licences, warranties, principal vs. agent arrangements, and bill-and-hold transactions.