+27 72 490 8099





IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Under this standard a five-step approach is followed for revenue recognition as follows:

Step 1 Identify the contract: Contract can have a written and non-written form or be implied (contract may not be limited to goods or services explicitly mentioned in a contract, but also include those expected to be delivered due to business practices or statements made).

Step 2 Identify the Performance obligations (PO): Identify all the performance obligations under the contract i.e. whatever promise is made for provision of good or service to the customer.

Step 3 Determine the transaction price: Determine the amount of consideration promised including any variable consideration.

Step 4 Allocate transaction price over the performance obligations: Allocate the Transaction price over the Performance obligation based on their stand alone selling price.

Step 5 Recognise revenue: For each PO revenue would be recognise as that PO is satisfied. This can be either at a point in time or over time. There are certain criteria given in IFRS 15 where it would over time, and for all other cases it would be point in time. So, revenue would be recognised when the PO has been satisfied.

IFRS 15 became mandatory for accounting periods beginning on or after 1 January 2018.


By providing a proper framework of accounting standards, IFRS 15 brings far more accountability, efficiency, and transparency worldwide.

Reducing the information gap between those who provide capital and those who have been entrusted with the money really strengthens accountability. IFRS 15 holds management bodies to account and provides vital information to regulators around the globe.

Efficiency is achieved through IFRS 15 because the standards help investors to identify what is a risky opportunity and what is viable to invest in. This, in turn, improves capital allocation, lowers the overall cost of capital, and results in a reduction of international reporting costs and fees.

Finally, the whole framework brings transparency through the enhancement of international comparability and the provision of high-quality information. This gives market participants and investors the ability to make better, well-informed decisions.

Who Will Feel the Biggest Impact of IFRS 15?

The experts say that the most impacted industries are telecom, software development, real estate and other industries with long-term contracts.


Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.

 The objective of the revenue standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets.  The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.

Revenue is an important number to users of financial statements in assessing a company’s performance and prospects. The primary issue in accounting for revenue is determining when to recognise revenue. Under the proposed model, revenue would be recognised on the basis of increases in an entity’s net position in a contract with a customer.

For more information, please visit our website: www.alertsprofessionalservices.co.za