Strategic Business Reporting (International) · Revenue

IFRS 15 Revenue Over Time vs Point in Time

Updated 11 October 2026 · Fact-checked

Under IFRS 15, you recognise revenue when a performance obligation is satisfied, which happens when control passes to the customer. First test the three over-time criteria. If none is met, revenue is recognised at the point in time when control transfers, judged using indicators such as legal title, possession and acceptance.

Understand Recognition Over Time vs Point in Time

IFRS 15 recognises revenue when you satisfy a performance obligation by transferring a promised good or service. A good or service is transferred when the customer obtains control of it. Control means the customer can direct the use of the asset and obtain substantially all of its remaining benefits.

For each performance obligation, you must decide first whether it is satisfied over time or at a point in time. The standard makes you test over time first. Point in time is the default if no over-time criterion is met. Many students reverse this order and lose marks.

Revenue is recognised over time if any one of three criteria is met. First, the customer simultaneously receives and consumes the benefits as you perform (for example, a cleaning service). Second, your performance creates or enhances an asset the customer controls as it is created (for example, building on the customer's land). Third, your performance creates an asset with no alternative use to you, and you have an enforceable right to payment for performance completed to date.

If revenue is recognised over time, you must measure progress towards complete satisfaction. You choose one method and apply it consistently to similar obligations. Output methods use the value to the customer of work done, such as surveys of performance, milestones reached or units delivered. Input methods use your efforts, such as costs incurred, labour hours or machine hours, relative to total expected inputs. Costs incurred is common in exam questions.

If no over-time criterion is met, revenue is recognised at the point in time control transfers. The standard gives indicators, not a checklist: a present right to payment, legal title, physical possession, significant risks and rewards of ownership, and customer acceptance. You weigh these in the scenario. If you cannot reasonably measure the outcome of an over-time obligation, you recognise revenue only to the extent of costs incurred that you expect to recover.

Key rules to remember

Over-time criteria: Over time if ANY one of: (a) customer receives and consumes benefits as you perform; (b) customer controls the asset as it is created or enhanced; (c) no alternative use AND enforceable right to payment for work to date; Test these first. Criterion (c) needs both conditions to be met.
Cost-to-cost progress (input method): Progress % = costs incurred to date ÷ total expected costs; Costs that do not reflect progress, such as wasted materials or inefficiencies, are excluded. Uninstalled materials may need adjusting.
Cumulative revenue: Cumulative revenue = transaction price × progress %; Revenue for the year = cumulative revenue to date − revenue recognised in earlier years.
Point-in-time indicators: Present right to payment; legal title; physical possession; risks and rewards; customer acceptance; These are indicators of control transfer. None is decisive alone.
Output method examples: Surveys of performance; appraisals of results; milestones reached; units produced or delivered; Use the method that best depicts transfer of control to the customer.

How to solve Recognition Over Time vs Point in Time questions

Use this order for any over-time versus point-in-time question. Always apply it to the facts in the scenario.

1Identify the separate performance obligations in the contract. Do not treat a whole contract as one obligation without checking.
2Test the three over-time criteria in order. State which are met or not met, with a fact from the scenario for each.
3If an over-time criterion is met, choose a progress method (input or output) that faithfully depicts transfer of control, and justify the choice.
4Calculate progress, then cumulative revenue, then deduct revenue already recognised to find the current-year revenue.
5If no criterion is met, go through the control indicators and conclude on the date control passes. Revenue is recognised on that date.
6Deal with costs: expense or recognise as inventory or contract assets as appropriate, and note any loss-making contract needing a provision.
7State the presentation: contract asset, receivable or contract liability, depending on the right to consideration and payments received.
8Add a short conclusion and, where relevant, comment on judgement or earnings management risk.

Quickest way: Three-criteria screen, then cost-to-cost

When to use it: Use when a long-term contract or service question gives costs and a contract price and asks for revenue and profit for the year.

Write the three criteria and tick or cross each with a one-line reason.
If over time, compute progress = costs to date ÷ total expected costs.
Cumulative revenue = price × progress. Subtract prior-year revenue.
Cost of sales = costs incurred (unless some are excluded as not reflecting progress). Profit = revenue − cost of sales.
If total expected costs exceed the price, recognise the full expected loss immediately.

Common mistakes in Recognition Over Time vs Point in Time

Treating over time as the default and checking point in time first.
Students remember old risks-and-rewards thinking, or assume long contracts are always over time.
Fix: Always test the three over-time criteria first. Point in time applies only if none is met.
Saying criterion (c) is met because the asset has no alternative use.
Students forget the second condition.
Fix: Require both no alternative use and an enforceable right to payment for work completed to date, including a reasonable profit margin.
Using risks and rewards as the sole test of control transfer.
It was the key test under the old standard, IAS 18.
Fix: Treat risks and rewards as one of several indicators. Base the conclusion on control, supported by title, possession, payment and acceptance.
Recognising the whole cumulative revenue as this year's revenue.
Students skip the deduction of amounts recognised in earlier periods.
Fix: Current-year revenue = cumulative revenue − prior-year revenue. Show the working.
Including all costs in the progress percentage regardless of whether they reflect progress.
Students apply cost-to-cost mechanically.
Fix: Exclude costs that do not depict performance, such as abnormal wastage, and consider materials purchased but not yet used.
Ignoring a loss-making contract.
Students focus on the revenue percentage only.
Fix: Compare total expected costs with the price. If costs exceed the price, recognise the whole expected loss immediately under IAS 37 as an onerous contract.

Worked examples

Example 1

Delta Co builds a bridge for a government on land owned by the government for a fixed price of $20 million. Delta's contract starts in 20X1. Expected total costs are $16 million. Costs incurred are $4 million at the end of 20X1 and $10 million at the end of 20X2. Delta uses costs incurred to measure progress. Explain the recognition pattern and calculate revenue and profit for 20X1 and 20X2.

Show the solution

Criterion (b) is met: the bridge is built on the customer's land, so the customer controls the asset as it is created. Revenue is therefore recognised over time.
Costs incurred is an input method and is suitable here because costs are expected to track progress.
20X1 progress = 4 ÷ 16 = 25%. Cumulative revenue = $20m × 25% = $5m. Revenue 20X1 = $5m. Cost of sales = $4m. Profit = $1m.
20X2 progress = 10 ÷ 16 = 62.5%. Cumulative revenue = $20m × 62.5% = $12.5m.
Revenue 20X2 = $12.5m − $5m = $7.5m. Cost of sales 20X2 = $10m − $4m = $6m. Profit 20X2 = $1.5m.

Answer: Revenue is recognised over time under criterion (b). 20X1: revenue $5m, profit $1m. 20X2: revenue $7.5m, profit $1.5m.

Example 2

Sigma Co manufactures a standard machine and sells it to a customer under a contract. The customer can cancel before delivery with no payment. Sigma can sell the machine to others. On 30 November the machine is delivered, the customer inspects and signs acceptance, and legal title passes. The customer is invoiced $90,000 on 30 November, with payment due in 30 days. The year end is 31 December. Explain when Sigma should recognise revenue.

Show the solution

Test the over-time criteria. The customer does not receive and consume benefits as Sigma performs, so (a) is not met.
The machine is built in Sigma's factory and the customer does not control it during production, so (b) is not met.
The machine has an alternative use because Sigma can sell it to others, and Sigma has no enforceable right to payment for work done if the customer cancels. Criterion (c) is not met.
No over-time criterion is met, so revenue is recognised at a point in time.
Apply the indicators: legal title has passed, the customer holds the machine, the customer has accepted it, and Sigma has a right to payment through the invoice. Control transferred on 30 November.
Revenue of $90,000 is recognised on 30 November, within the year to 31 December. The unpaid amount is a receivable because only the passage of time remains before payment is due.

Answer: Revenue of $90,000 is recognised at a point in time on 30 November, when control transfers. A receivable is recorded for the amount due.

Exam tips

Write out the three over-time criteria and apply each one to a fact in the scenario. This earns both technical and application marks.
Justify your choice of input or output method. Say why it faithfully depicts the transfer of control in this contract.
For point-in-time answers, discuss several indicators and point out any that conflict, such as possession without acceptance. Then give a clear conclusion.
Link to ethics and professional skills where the scenario shows pressure to recognise revenue early. Mention scepticism and earnings management risk.
Show every working line for progress, cumulative revenue and prior-year deduction, so you can pick up method marks if a number is wrong.

Practice questions from Revenue

Recognition Over Time vs Point in Time in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Recognition Over Time vs Point in Time: frequently asked questions

What is the difference between input and output methods in IFRS 15?

Output methods measure progress by the value of what has been transferred to the customer, such as milestones or units delivered. Input methods measure it by your efforts, such as costs incurred or hours worked. Choose the one that best shows the transfer of control.

Can a contract be partly over time and partly point in time?

Yes, if it contains more than one distinct performance obligation. Each obligation is assessed separately. One might be satisfied over time, such as a service, and another at a point in time, such as delivery of equipment.

Do I need all five control indicators for point in time recognition?

No. The indicators are not a checklist and no single one is decisive. You weigh them together to judge whether the customer has obtained control.

What happens if I cannot measure progress reliably?

If you cannot reasonably measure the outcome of an over-time obligation but expect to recover the costs, you recognise revenue only up to the costs incurred. You recognise no profit until you can measure progress reasonably.