IFRS 15Chapter 7Lesson 1
Step 5 (1): control and recognition over time
Step 1 of 7Learning objectives
Go deeper+2 deeper insights · +1 example · +1 point of attention
Revenue is recognised when the customer obtains control of what it was promised. From contract inception, each performance obligation is classified: satisfied over time if one of three criteria is met (simultaneous consumption, an asset controlled by the customer as it is created, an asset with no alternative use combined with an enforceable right to payment), otherwise satisfied at a point in time.
25 minNot started
Learning objectives
- Explain the notion of control of an asset and why revenue follows the transfer of control.
- Apply the three criteria for recognition over time, in order, to a performance obligation.
- Assess the absence of an alternative use (substantive contractual restriction, practical limitation) and the enforceable right to payment.
- Conclude, when no criterion is met, that the obligation is satisfied at a point in time, and document the analysis.