International Accounting Standards Board

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Step four is to allocate the transaction price to performance obligations. The transaction price should be allocated base on the stand-alone selling price of the goods or service. If stand-alone selling price is not available, then companies can use either the adjusted market price, the expected costs plus a margin or deducting other goods or services stand-alone selling price from the total transaction price. It is good to allocate the transaction price to performance obligations, however, it will sometimes be difficult to estimate the stand-alone price when there are no previous examples.

The final step is to recognize the revenue when the entity satisfies the performance obligation. The amount is the price allocated to the performance obligation, and the time of recognizing depends on the control of the good or service transfer to the customer. When the recognition of the revenue is over time, there are mainly two method to calculate the process of the work, the output method and the input method output method calculate the progress by the finished process of the work for example unit produced or percentage of the building while input method calculate by the cost incurred. Unlike the old standard, different assessment outcomes by differences in contract terms may result in different timing of revenue recognizing.

To conclude, HKFRS 15 “Revenue from Contracts with Customers” has combined HKAS 18 “Revenue” and HKAS 11 “Construction Contracts” and also some other old standard on the calculation and recording of revenue arising from contracts with customers. It provide a five-step model on recognizing revenues includes identifying the contract with a customer, the performance obligations in the contract, the transaction price, allocating the transaction price to performance obligations and finally recognize the revenue when the entity satisfies the performance obligation. This can states more clear method on recognizing revenues which cover more situations than the old standard so that accountants can determined revenues more sophisticated, and the different methods using by different entities will be united and the comparison between different entities can be more accurate under the same accounting method.

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