Insights into MFRS 15

Insights into MFRS 15: Overview and scope

18 Mar 20261 min read

Revenue recognition is fundamental in all businesses, and it is important that it is recognised in a consistent and comparable way across industries and capital markets. The Standard makes it clear that its purpose is not to redefine the concept of revenue, but rather to ensure that revenue is consistently recognised at the appropriate time and at the most reliable amount.

Our ‘Insights into MFRS 15’ series summarises the key areas of the Standard, highlighting some areas that are challenging to apply in practice, to assist reporting entities in understanding how to apply MFRS 15’s requirements. This article focuses on the objective and scope of MFRS 15.

Overview: A single model for revenue recognition

MFRS 15 is based on a core principle that requires an entity to recognise revenue:

in a manner that depicts the transfer of goods or services to a customer, and
at an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

MFRS 15 sets out a control-based model built around the following five steps:

The five-step model

An entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Step 1 - Identify the contract with the customer
Step 2 - Identify the performance obligations
Step 3 - Determine the transaction price
Step 4 - Allocate the transaction price to the performance obligation
Step 5 - Recognise revenue