Revenue – ifrs 15 handbook

Method
Description
Examples
Input
Based on an entity’s efforts 
or inputs towards satisfying 
a performance obligation, 
relative to the total expected 
inputs into the satisfaction of 
that performance obligation
– Resources consumed
– Costs incurred
– Time elapsed
– Labour hours expended
– Machine hours used
IFRS 15.B16
As a practical expedient, if an entity has a right to invoice a customer at an amount 
that corresponds directly with its performance to date, then it can recognise 
revenue at that amount. For example, in a services contract an entity may have the 
right to bill a fixed amount for each unit of service provided. See 
5.3.4
.
IFRS 15.B15, BC165
If an entity’s performance has produced a material amount of work in progress 
or finished goods that are controlled by the customer, then output methods such 
as units-of-delivery or units-of-production as they have been historically applied 
may not faithfully depict progress. This is because not all of the work performed is 
included in measuring the output.
IFRS 15.B18
If an input method provides an appropriate basis to measure progress and an 
entity’s inputs are incurred evenly over time, then it may be appropriate to recognise 
revenue on a straight-line basis.
IFRS 15.B19
However, there may not be a direct relationship between an entity’s inputs and 
the transfer of control. Therefore, an entity that uses an input method considers 
the need to adjust the measure of progress for uninstalled goods and significant 
inefficiencies in the entity’s performance that were not reflected in the price of the 
contract – e.g. wasted materials, labour or other resources (see 
5.3.3
). For example, 
if the entity transfers to the customer control of a good that is significant to the 
contract but will be installed later, and if certain criteria are met, then the entity 
recognises the revenue on that good at zero margin.
IFRS 15.44–45
An entity recognises revenue over time only if it can reasonably measure its 
progress towards complete satisfaction of the performance obligation. However, if 
the entity cannot reasonably measure the outcome but expects to recover the costs 
incurred in satisfying the performance obligation, then it recognises revenue to the 
extent of the costs incurred.

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5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 133
5.3 Measuring progress towards complete satisfaction of a performance obligation
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