IFRS 15 – Core Principles of Revenue Recognition

IFRS 15 – Revenue from Contracts with Customers

IFRS 15 is an international standard that sets out the principles for reporting to financial statement users about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.

Related Standards

•IFRS 16 – Leases

•IFRS 9 – Financial Instruments

•IFRS 4 – Insurance Contracts

•IFRS 10 – Consolidated Financial Statements

•IFRS 11 – Joint Arrangements

•For businesses of the same type, exchanging goods on a non-cash basis to facilitate sales to major customers.

•For small retail businesses that sell directly and recognize revenue immediately, IFRS 15 has minimal impact.

The 5 Steps of Revenue Recognition under IFRS 15

1.Identify the contract

2.Identify the performance obligations

3.Determine the transaction price

4.Allocate the transaction price to the performance obligations

5.Recognize revenue when (or as) the performance obligations are satisfied

Accounting for Contract Costs

•If the company expects to recover the incremental costs of obtaining a contract, those costs are recognized as an asset.

•Regardless of whether a contract is obtained, costs related to obtaining it are recognized as an expense when incurred.

•In practice, if the cost relates to a period of less than one year, it can be expensed immediately.

Pro Tip

Applying the 5-step model and correctly accounting for contract costs is essential for the accuracy of financial statements. By choosing Beta Zeno Finance, you can access professional accounting and financial services in compliance with Mongolian tax law, accounting standards, and International Financial Reporting Standards (IFRS).

In the next article, we will cover IFRS 15's presentation and common industry-specific challenges.

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