Revenue recognition
Revenue recognition is the principle that revenue is recorded when it is earned — when the business has substantially fulfilled its obligations to the customer — regardless of when the cash is received.
FrameworkIFRS 15 (revenue)
See it move
A four-step flow traces one service transaction from agreement to cash. The first box, Contract signed, notes the obligation is agreed but no revenue has yet been earned. The second, Service delivered, marks the moment control passes to the customer — the trigger for recognition. The third box records €6,000 recognised in February, the month of delivery. The final box, Cash received, sits in March, confirming that the inflow of cash is a distinct event, separate from and later than the earning of the revenue.
Check yourself
A consultancy completes a €6,000 market study on 28 February and invoices the client the same day. The client pays on 20 March. Under accrual accounting, in which period is the €6,000 recognised as revenue?
If you trained under a national GAAP
FR · PCGWhere national-GAAP intuition diverges from the international standard
PCG (French)
French GAAP records revenue (produits) when the economic event generating the income is complete — typically when title to goods passes or a service is rendered in full. For long-term contracts, either the percentage-of-completion or the completed-contract method may be applied depending on contract type, but there is no unified decision framework requiring entities to unbundle contracts into distinct obligations or to include probability-weighted variable consideration in revenue.
IFRS
IFRS 15 applies a structured five-step model: identify the contract, identify distinct performance obligations, determine the transaction price, allocate it across obligations, and recognise revenue as each obligation is satisfied. Variable consideration such as volume rebates or performance bonuses must be estimated and included in revenue to the extent it is highly probable that no significant reversal will occur. This estimation requirement can result in earlier recognition of certain revenues compared with the more event-driven approach under FR PCG.