Principles of revenue recognition

In this lesson

1. 0:00 Revenue recognition principles overview
2. 1:11 Five-step IFRS 15 framework explained
3. 2:04 Step one: Identifying the contract
4. 3:11 Step two: Performance obligations defined
5. 5:15 Step three: Determining transaction price
6. 8:25 Financing components and discounting example
7. 11:30 Step four: Allocating price across obligations
8. 15:04 Step five: Revenue recognition timing
9. 18:07 Measuring progress for long-term contracts
10. 20:02 Complete revenue recognition worked example
11. 22:59 Contract revenue and claims guidance

About this lesson

You'll discover how to identify performance obligations, determine transaction prices, and recognise revenue either at a point in time or over a period of time, with worked examples showing how to handle financing components, discounts, and multiple obligations in real contracts. This is core content for Financial Reporting (FR), Strategic Business Reporting (SBR), and Advanced Financial Reporting (F2), where revenue recognition questions appear regularly in both objective tests and case studies. The principles you'll master here apply across virtually every business transaction, from simple goods sales to complex long-term service contracts. The session walks you through each step methodically: identifying valid contracts, spotting separate performance obligations (like bundled products or services), calculating the correct transaction price when there are variables or financing arrangements, allocating prices fairly across multiple obligations, and timing revenue recognition correctly. You'll work through practical scenarios—including a machinery sale with deferred payment, a discounted computer-plus-support bundle, and a maintenance contract—to see exactly how the framework applies and how to present these transactions in your financial statements. By the end, you'll understand not just the mechanics of IFRS 15, but the logic behind it: ensuring revenue is recognised when control of goods or services actually transfers to the customer, and that your financial statements reflect the true economic substance of the transaction.

Duration: 24m