Revenue – ifrs 15 handbook

1 March 2019
Cash
1,000
Receivable
1,000
To record D’s receipt of cash
31 March 2019
Contract liability
1,000
Revenue
1,000
To record D’s satisfaction of performance 
obligation
If D issued the invoice before 31 January 2019 – i.e. the payment due date – 
then it would not record a receivable before 31 January 2019 because it would 
not yet have an unconditional right to consideration.
Receivable vs contract asset – Distinction based on unconditional 
right to consideration
IFRS 15.IE201–IE204
Under the standard, an entity recognises a receivable when it has a right to 
consideration that is unconditional. The timing of recognition of receivables 
is critical because it may impact their classification and measurement. For 
example, there may be an impact on the classification assessment under the 
financial instruments standard, or the fair value of a receivable may be different 
from the carrying amount of the related contract asset. Determining when to 
recognise a receivable may be straightforward in some cases but challenging in 
others. The following flowchart may help with the analysis.
No
Yes
No
Yes
No
Has the entity performed?
Does the entity have a
contractual right to bill?
Does the entity have an
unconditional right to cash?
Receivable
and a contract
liability
No asset or
liability
Contract asset
Receivable
Yes

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310 | Revenue – IFRS 15 handbook
The first step in the analysis is to determine whether the entity has performed 
under the contract. If it has, then the entity considers whether it has an 
unconditional right to receive cash. The right to receive cash may be conditional 
on continuing performance under the contract. Example 39 in the standard 
illustrates a scenario in which the right to consideration for a delivered product 
is conditional on the delivery of a second product – i.e. an entity has an 
unconditional right to consideration only after both products are transferred. 
Because the right to consideration under the contract is not unconditional, the 
entity recognises a contract asset instead of a receivable.
IFRS 15.108, IE199–IE200
Under some contracts, an entity has a right to bill the customer in advance of 
delivering a good or service. In these cases, it appears that the entity should 
generally recognise a receivable and a contract liability when both of the 
following conditions are met:
– the contract is non-cancellable; and
– the entity has an unconditional right to bill the customer under the payment 
terms of the contract.
Under other contracts, an entity may have a right to demand payment for 
performance completed to date if the contract is terminated by the customer 
or another party. If the contract is not terminated in this way, then the entity 
has a right to bill the customer only once the contract is complete. It appears 
that in these cases, the entity should not generally recognise a receivable as 
it performs. This is because, before completion of the contract, the right to 
compensation is conditional on termination of the contract. For an illustration, 
see 
Example 9A
in this chapter.