Acca financial Accounting (FA) Study Text ac ca (FA)

'income arising in the course of an entity's ordinary 

activities' 

IFRS 15, Appendix A). 

The five-step approach for revenue recognition 

Revenue from the sale of goods and/or provision of services should be 

recognised based upon application of the five-step approach: 

1 

Identify the contract 

2 

Identify the separate performance obligations within a contract 

3 

Determine the transaction price 

4 

Allocate the transaction price to the performance obligations in the 

contract 

5 

Recognise revenue when (or as) a performance obligation is satisfied. 

Each of the five steps will be considered in turn using the following illustration to 

help you gain an understanding of the basic principles. 

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