IFRS 15 Revenue from Contracts with Customers replaced IAS 18 and introduced a single, comprehensive framework for revenue recognition.
The 5-Step Model
Step 1: Identify the Contract with a Customer
A contract is an agreement with enforceable rights and obligations. It can be written, oral, or implied by business practice.
Step 2: Identify the Performance Obligations
What has your business promised to deliver? Each distinct good or service is a separate performance obligation.
Step 3: Determine the Transaction Price
This is the amount you expect to receive. Variable consideration (bonuses, discounts, penalties) must be estimated and included.
Step 4: Allocate the Transaction Price
If there are multiple performance obligations, allocate the total price to each based on relative standalone selling prices.
Step 5: Recognise Revenue When Each Obligation is Satisfied
Revenue is recognised when the customer obtains control of the good or service — not just when you invoice or receive cash.
Common Impacts for Kenyan Businesses
- Retainer-based professionals must defer revenue across the service period
- Construction firms must use percentage-of-completion method
- Subscription businesses recognise revenue monthly, not upfront
Our IFRS team reviews your revenue streams and helps you implement IFRS 15 correctly, ensuring your financial statements accurately reflect the economic reality of your business.
