Step 1: Identify
the contract
with the
customer
Step 2: Identify
the distinct
performance
obligations
Step 3:
Determine the
transaction
price
Step 4:
Allocate the
transaction
price to the
performance
obligations
Step 5:
Recognition of
revenue when
or whilst a
performance
obligation is
satisfied
 Recognise the rights, risk, timing and potential change in cash flow
associated with the provision of goods and service
 Bundle that provides the same purpose or if the payment of one is
dependent of another
 Inclusions of any promises implied by business practices, policies or
explicit statements
 A separate obligation is the promise of transfer of a distinct good and
services that are substantially the same
 A distinct goods and or service is when the promise to transfer is
separately identified from the other promises within the contract.
 Entities need to consider the impacts of warranties, implicit promises
or any acquisition of additional goods or service.
 Extent the provider of goods and services considers or expects to be
entitled in exchange for the transfer of the goods and or service
 Consider the impact of discounts, rebates, credits, refunds,
concessions, incentives, bonuses and penalties given to the
customers, considering that a substantial reversal in the amount in
question is not likely to occur.
 Significant financing component that may arise from a deferred
payment arrangement, non-cash consideration and the impact in
consideration payable by the customer including cash backs, coupons
or voucher, disregarding the consideration payment of a distinct
good or service.
 No single way to determine as it depends on whether the expected
amount or the most likely estimated amount will be a more accurate
prediction of the amount in consideration by the provider.
 Allocate this price in an amount that reflects the amount the
provider expects to be entitled
 Based on observation or otherwise estimated at the commencement
of the contract, except in limited circumstance.
 Not adjusted to reflect the changes in the stand-alone prices of the
promised goods or service
 Changes in the transaction price after the commencement of the
contract on the same basis as the contract at commencement.
 Recognised when the provider has performed or satisfied a
performance obligation through the transference of the goods and or
service to the customer.
 Considers the timing method of revenue recognition an if it should
be recognised over time or at a point in time. If accepted over time,
indicates that the customer concurrently receives and consumes the
benefits of the provider’s provision. The provider’s performance
creates or enhance an asset that the customer controls or if the
provider does not create an asset with another use to the provider
but they have the enforceable right to the payment for the
performance completion to date.
 the provider has reliable and accurate information and will be
applied consistently over time acting as a precedent with another
similar situation.
 At a point in time indicates the customer will control the transferred
asset which includes any asset within the provision of a service.