IFRS 15 Revenue from Contracts with Customers is the IFRS standard on revenue. Its core principle is that a company recognises revenue to depict the transfer of promised goods or services to customers, in an amount that reflects the consideration it expects to be entitled to. It applies a five-step model and has been effective for annual periods beginning on or after 1 January 2018.
What is IFRS 15?
IFRS 15 decides when revenue is recognised and how much. The answer turns on control: revenue is recognised when, or as, the customer obtains control of the promised good or service, not when the invoice is raised or the cash arrives (paragraph 31). The same model applies whether the company sells products, services, software or construction work, with exceptions for contracts covered by other standards, such as leases.
What are the five steps of IFRS 15?
- Identify the contractAn agreement that creates enforceable rights and obligations, and meets the criteria in paragraph 9, such as approval by the parties and probable collection.
- Identify the performance obligationsEach promise to transfer a distinct good or service, or a series of substantially the same ones (paragraph 22).
- Determine the transaction priceThe consideration the company expects to be entitled to, taking into account the contract terms and its customary business practices (paragraph 47).
- Allocate the priceSplit the transaction price across the performance obligations in proportion to their stand-alone selling prices (paragraphs 73 and 76).
- Recognise revenueWhen each obligation is satisfied: over time if one of the criteria in paragraph 35 is met, such as the customer receiving the benefit as the company performs; otherwise at a point in time (paragraph 38).
The balance sheet follows the same logic. Cash received before performance is a contract liability, often labelled deferred revenue. Performance before the right to payment is unconditional is a contract asset, and an unconditional right to payment is a receivable (paragraphs 105 to 108).
What does IFRS 15 look like in practice?
Why does IFRS 15 matter for finance teams in the GCC?
In Saudi Arabia, SOCPA applies international standards to companies listed on the financial market from financial statements starting 1 January 2017, and to other entities from periods beginning 1 January 2018; small and medium-sized entities without public accountability may use the IFRS for SMEs Standard and follow its own revenue requirements instead. Project businesses feel IFRS 15 most: progress billing rarely matches the pattern of performance, so revenue, contract assets and contract liabilities have to be worked out contract by contract, and the timing is a cut-off question every month end.
Questions people ask
What did IFRS 15 replace?
It superseded IAS 18 Revenue and IAS 11 Construction Contracts, together with related interpretations (paragraph C10), with a single model for contracts with customers.
When is revenue recognised over time?
When one of three criteria in paragraph 35 is met: the customer receives and consumes the benefit as the company performs; the company’s work creates or enhances an asset the customer controls; or the work creates an asset with no alternative use to the company and it has an enforceable right to payment for work done to date.
Is a signed contract required?
No. A contract can be written, oral or implied by customary business practice, as long as it creates enforceable rights and obligations and meets the criteria in paragraph 9.
Official and primary sources, read on the date shown. Rules change: confirm with the authority or your adviser before you act.
- IFRS Foundation: IFRS 15 Revenue from Contracts with Customers (standard page) (read 9 October 2026)
- AASB 15 Revenue from Contracts with Customers (compiled September 2018), which incorporates IFRS 15: paragraphs 2, 5, 9, 22, 31, 35, 38, 47, 73, 76, 105 to 108 and C10 (read 9 October 2026)
- SOCPA: Overview of Professional Standards (application of international standards in Saudi Arabia) (read 9 October 2026)