The five steps in revenue recognition model are given below:
- Identify the contract with the customer
- Identify the separate performance obligations in the contract
- Determine the transaction price
- Allocate the transaction price to the separate performance obligations
- Recognize revenue when each performance obligation is satisfied
Respondents’ concerns included lack of clarity about the notion of “continuous transfer” (as discussed in IFRIC 15), greater use of subjective estimates where the consideration received is variable, application of the model to accounting for warranties and the application of the guidance to onerous contracts.
Revenue recognition model is done in accordance with IAS 18.