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Revenue

1.6 Step 5: Recognise revenue

Revenue is recognised when (or as) the entity satisfies a performance obligation by
transferring a promised good or service to a customer.

An entity must determine at contract inception whether it satisfies the performance
obligation over time or at a point in time.

Performance

obligation

Satisfied over Satisfied at a
time? point in time?

1.7 Performance obligation satisfied over time

IFRS 15 states that an entity only satisfies a performance obligation
over time if one of the following criteria is met:

 the customer simultaneously receives and consumes the benefits
from the entity’s performance

 the entity is creating or enhancing an asset controlled by the
customer

 the entity cannot use the asset ‘for an alternative use’ and the
entity can demand payment for its performance to-date.

If a performance obligation is satisfied over time, then revenue is recognised based
on the progress towards completion.

Progress towards completion may be measured using either an input method (based
on costs incurred as a proportion of total expected cost) or an output method (based
on value of work completed as a proportion of total contract price).

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