Revenue – ifrs 15 handbook

… an asset
Use of control concept to recognise revenue aligns with the 
accounting for assets
IFRS 15.BC118
The standard is a control-based model. First, an entity determines whether 
control of the good or service transfers to the customer over time based on the 
criteria in the standard and, if it does, the pattern of that transfer. If it does not, 
then control of the good or service transfers to the customer at a point in time 
(see 
Section 5.4
).

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5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 115
5.2 Performance obligations satisfied over time
| 
The standard extends a control-based approach to all arrangements, including 
service contracts. The International Accounting Standards Board (the Board) 
believes that goods and services are assets – even if only momentarily – when 
they are received and used by the customer. The standard’s use of control to 
determine when a good or service is transferred to a customer is consistent 
with the current definition of an asset under IFRS, which principally uses control 
to determine when an asset is recognised or derecognised.
5.2
Performance obligations satisfied over time
IFRS 15.32, 35
For each performance obligation in a contract, an entity first determines whether 
the performance obligation is satisfied over time – i.e. control of the good or 
service transfers to the customer over time. It does this using the following criteria 
(a different approach applies if the performance obligation is a licence of IP – see 
Chapter 9
).
Criterion
Example
1
The customer simultaneously receives 
and consumes the benefits provided by 
the entity’s performance as the entity 
performs
Routine or recurring services – 
e.g. cleaning services
2
The entity’s performance creates or 
enhances an asset that the customer 
controls as the asset is created or 
enhanced
Building an asset on a 
customer’s site
3
The entity’s performance does not 
create an asset with an alternative use 
to the entity (see 
5.2.1
) and the entity 
has an enforceable right to payment 
for performance completed to date 
(see 
5.2.2
)
Building a specialised asset 
that only the customer can 
use or building an asset to a 
customer’s specifications
IFRS 15.35, 38–39
If one or more of these criteria are met, then the entity recognises revenue over 
time, using a method that depicts its performance – i.e. the pattern of transfer 
of control of the good or service to the customer. If none of the criteria is met, 
then control transfers to the customer at a point in time and the entity recognises 
revenue at that point in time (see 
Section 5.4
).

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© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
116 | Revenue – IFRS 15 handbook
IFRS 15.B3–B4, BC125–BC128