This free, guided checker walks your finance team through the key decision points for IFRS 15 Revenue Contract Assessment. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Test all five IFRS 15.9 criteria together and only at inception: the parties have approved the contract and are committed to perform, each party's rights to the goods or services are identifiable, the payment terms are identifiable, the contract has commercial substance, and it is probable the entity will collect the consideration to which it is entitled. Assess collectability against the customer's ability and intention to pay when the amounts fall due, considering credit history and current circumstances. The trap is recognizing revenue on a signed arrangement where collection is not probable, or where either party can terminate a wholly unperformed contract without penalty (IFRS 15.12).
Do not recognize revenue until the IFRS 15.9 contract criteria are met; account for any consideration received under IFRS 15.15-16.
Official guidance: IFRS issued standards
List every promised good or service in the contract, including options and free or bundled items, because payment-service arrangements commonly combine merchant transaction processing, point-of-sale device rental, setup or onboarding, and service-level support. Review the master agreement, order forms, and side letters, not just the headline deliverable. The trap is treating the arrangement as a single deliverable and missing implied promises created by customary business practice or published policies (IFRS 15.24).
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Official guidance: IFRS issued standards
A promise is distinct only when both tests are met: the customer can benefit from the good or service on its own or with other readily available resources, and the promise is separately identifiable from the other promises in the contract (IFRS 15.27). Apply the IFRS 15.29 separately-identifiable factors, asking whether the entity provides a significant integration service and whether the items significantly modify or are highly interdependent with each other. The trap is unbundling items that are in substance a single combined output, or bundling items that the customer could and does buy separately.
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Official guidance: IFRS issued standards
Determine a standalone selling price for each performance obligation at contract inception, using the observable price the entity charges when it sells the good or service separately where one exists (IFRS 15.76). Where no observable price exists, estimate it with the adjusted market assessment, expected cost plus a margin, or, only in limited circumstances, the residual approach (IFRS 15.79), then allocate the transaction price on a relative standalone selling price basis (IFRS 15.74). The trap is defaulting to the contract price for each item, or using the residual approach where an item has a reasonably estimable standalone price.
Complete the standalone selling-price analysis and relative allocation before recognizing allocated revenue (IFRS 15.74; IFRS 15.76).
Official guidance: IFRS issued standards
Screen the consideration for variable elements (discounts, rebates, refunds, credits, incentives, performance bonuses, penalties, and usage-based or contingent fees) and for a significant financing component created by the timing of payments (IFRS 15.50-52; IFRS 15.60). Estimate variable consideration using either the expected value or the most likely amount, whichever better predicts the consideration to which the entity will be entitled. The trap is ignoring implied price concessions and volume rebates, or overlooking a financing component when payment is materially advanced or deferred relative to transfer (IFRS 15.61-62).
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Official guidance: IFRS issued standards
Apply the IFRS 15.56 constraint by including estimated variable consideration in the transaction price only to the extent that it is highly probable a significant revenue reversal will not occur when the uncertainty is later resolved. Weigh the IFRS 15.57 factors, such as susceptibility to factors outside the entity's influence, the length of time until the uncertainty resolves, and the entity's experience with similar contracts. The trap is recognizing the full estimate up front for amounts that depend on future events, then having to reverse revenue when the outcome becomes known.
Apply the variable consideration constraint before allocation and recognition (IFRS 15.56).
Official guidance: IFRS issued standards
Test each performance obligation against the three IFRS 15.35 over-time criteria: the customer simultaneously receives and consumes the benefits as the entity performs; the entity's performance creates or enhances an asset the customer controls as it is created; or the asset has no alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If none is met, control transfers at a point in time and revenue is recognized then, assessed against the IFRS 15.38 indicators (present right to payment, legal title, physical possession, risks and rewards, and customer acceptance). The trap is defaulting a service to over time without confirming an over-time criterion, or defaulting a good to point in time without testing the no-alternative-use and right-to-payment criterion.
Recognize revenue when control transfers at a point in time, assessed against the IFRS 15.38 indicators.
Official guidance: IFRS issued standards
Choose the single method that most faithfully depicts the transfer of control for the obligation, and apply one method consistently for similar obligations and circumstances (IFRS 15.40). A time-based measure such as straight-line fits a stand-ready service delivered evenly, such as device rental or fixed-fee support (IFRS 15.B15-B16); an output method fits where delivered units, milestones, or results measure the value transferred (IFRS 15.B15); and an input method fits where cost or effort tracks progress, adjusted to exclude inputs that do not depict performance (IFRS 15.B18-B19). The trap is selecting an input method that includes uninstalled materials or inefficiencies, which overstates progress.
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Official guidance: IFRS issued standards
An entity recognizes over-time revenue only when it can reasonably measure progress toward complete satisfaction of the performance obligation (IFRS 15.44). Choose an output or input method that faithfully depicts performance and exclude inputs, such as uninstalled materials or inefficiencies, that do not represent transfer of control (IFRS 15.B19). If the outcome cannot yet be measured but the costs incurred are expected to be recovered, recognize revenue only to the extent of those costs (IFRS 15.45).
Recognize revenue over time using a measure of progress that faithfully depicts performance (IFRS 15.39; IFRS 15.44). Recognize revenue only to the extent of recoverable costs until progress can be measured faithfully (IFRS 15.45).
Official guidance: IFRS issued standards
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