Under IFRS 15, revenue recognition is tied to when the performance obligation is satisfied. Which statement best describes the timing?

• A. Revenue is recognised when control passes to the customer
• B. Revenue is recognised only when cash is received
• C. Revenue is recognised at the end of the contract term
• D. Revenue is recognised when the goods are shipped regardless of control

Answer: (A)

Revenue recognition under IFRS 15 hinges on the transfer of control of the promised goods or services to the customer, not on receiving cash or on the contract’s term. Control means the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset or service. Revenue is recognised when the entity satisfies a performance obligation by transferring control to the customer, and this can occur at a single point in time or over a period of time depending on how control is transferred. For goods, control typically passes when the customer obtains possession and the ability to direct the use (which under some contract terms can be when delivery occurs or, in other terms like FOB, when the goods are shipped or transferred). Cash receipt or the end of the contract do not determine the timing. This is why the correct description is that revenue is recognised when control passes to the customer.