IFRS 15 Revenue from Contracts with Customers

30 November 2017

By Anntice Lai

What you need to know about IFRS 15

IFRS 15 will become effective for financial statements with an annual period beginning on or after 1 January 2018. This Standard supersedes several standards that used to relate to revenue. 

The key principle of IFRS 15 is defining how an entity recognises revenue from the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

An entity recognises revenue by applying the following steps:

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation


Disclosure requirements of IFRS 15 aim to provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. IFRS 15 requires an entity to disclose the following information:

  • Revenue recognised from contracts with customers, including the disaggregation of revenue into appropriate categories;
  • Contract balances, including the opening and closing balances of receivables, contract assets and contract liabilities;
  • Performance obligations, including when the entity typically satisfies its performance obligations and the transaction price that is allocated to the remaining performance obligations in a contract;
  • Significant judgements, and changes in judgements, made in applying the requirements to those contracts; and
  • Assets recognised from the costs to obtain or fulfill a contract with a customer.


IFRS 15 requires retrospective application; however, it provides two application choices for first year application: Full retrospective approach & Modified retrospective approach. 


Five-step Approach

The five-step approach covers the process to determine when and how to recognise revenue and its respective amount.  

IFRS 15 Identify the performance obligations in the contract

 IFRS 15 Identify the contract with a customer


IFRS 15 Identify performance obligation in contract


IFRS 15 Determine the transaction price


IFRS 15 Allocate transaction price to performance obligations in contract


IFRS 15 Recognise revenue when entity satisfies performance obligation


What you need to do

  • Revisit the terms of all existing contracts
  • Follow the five-step model to assess the potential impacts in applying IFRS 15
  • Quantify the financial impacts that might arise in the first adoption
  • Consider whether the entity to adopt the full retrospective approach or modified retrospective approach
  • Discuss with your contact with us if you have any question


Anntice Lai is the director of technical and regulatory matters of Baker Tilly Hong Kong. 


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