The five-step model
IFRS 15 requires entities to:
- Identify the contract with a customer
- Identify performance obligations
- Determine the transaction price
- Allocate the transaction price
- Recognise revenue when (or as) performance obligations are satisfied
SaaS subscriptions
For annual SaaS contracts with a single performance obligation (access to software), revenue is typically recognised over time on a straight-line basis unless a material upfront service exists (e.g. implementation).
Multi-element arrangements
When selling software + training + support, each distinct performance obligation must be identified and priced using standalone selling prices.
Contract modifications
A modification is treated as a separate contract if it adds distinct goods/services and the price reflects their standalone value. Otherwise, it is accounted for as a modification of the existing contract.
Further reading
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