Understanding IFRS 15: Revenue from Contracts with Customers
By Ultramindhive – Your Partner in Financial Services & Bookkeeping
What is IFRS 15?
IFRS 15, formally titled Revenue from Contracts with Customers, is an international accounting standard that sets out how businesses should recognize revenue. It became effective from January 1, 2018 and applies to companies worldwide that prepare financial statements under International Financial Reporting Standards (IFRS) IFRS.
In simple words: IFRS 15 tells businesses when and how to record income from their customers. It ensures that revenue is reported consistently, transparently, and fairly across industries.
Why Does IFRS 15 Matter?
Revenue is one of the most important numbers in any company’s financial statements. Before IFRS 15, different industries followed different rules, which made comparisons difficult. IFRS 15 solves this by creating a single, unified model for revenue recognition.
For companies like Ultramindhive’s clients, this means:
• Clarity in financial reporting
• Consistency across industries
• Trust from investors, regulators, and customers
The Five Step Model of IFRS 15
At its heart, IFRS 15 introduces a five-step process for recognizing revenue:
1. Identify the contract with a customer
● A contract is any agreement (written or verbal) that creates enforceable rights and obligations.
2. Identify the performance obligations
● Performance obligations are the distinct goods or services a company promises to deliver.
3. Determine the transaction price
● This is the amount the company expects to receive in exchange for delivering the goods or services.
4. Allocate the transaction price
● If there are multiple performance obligations, the price must be split fairly among them.
5. Recognize revenue when (or as) performance obligations are satisfied
● Revenue is recorded when control of the goods or services passes to the customer, either over time or at a point in time.
Revenue Recognition: Over Time vs. Point in Time
One of the most important aspects of IFRS 15 is deciding when revenue should be recognized. There are two main approaches:
Revenue Recognized Over Time
Revenue is recognized gradually as the company fulfills its obligations. This applies when:
• The customer receives and consumes benefits as the company performs (e.g., monthly bookkeeping services).
• The company creates or enhances an asset that the customer controls as it’s created (e.g., building a customized software system).
• The company’s work does not create an asset with alternative use, and the company has the right to payment for work completed.
Example: Ultramindhive provides bookkeeping services for $12,000 a year. Revenue is recognized monthly ($1,000 each month) as services are delivered.
Revenue Recognized At a Point in Time
Revenue is recognized in full when control of goods or services passes to the customer. Indicators include:
• The customer has legal title.
• The customer has physical possession.
• The customer has accepted the goods or services.
• The customer has significant risks and rewards of ownership.
Example: Ultramindhive sells a one time financial report for $500. Revenue is recognized immediately when the report is delivered.
Key Takeaways for Businesses
• IFRS 15 makes revenue recognition transparent and comparable.
• It requires businesses to think carefully about contracts and obligations.
• For service providers like Ultramindhive, it ensures clients’ books reflect true financial performance.
How Ultramindhive Helps
At Ultramindhive, we specialize in financial services and bookkeeping. Our team ensures your business complies with IFRS 15, making your financial reporting clear, accurate, and investor-friendly. Whether you’re a small business or a growing enterprise, we simplify complex standards so you can focus on growth.
In short: IFRS 15 is about recognizing revenue fairly and consistently. With Ultramindhive by your side, compliance becomes simple, and your financial story is told with clarity.