IFRS 15 unified revenue recognition under one model with five steps. For most UAE SMEs the change from old standards is modest, but for SaaS, construction, and bundled offerings, IFRS 15 can shift revenue dramatically across periods.
What you'll learn
→ The five-step model → Common UAE applications → Construction and project revenue → Bundled offerings and gift cardsThe five-step model
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 performance obligations. Step 5: recognise revenue when (or as) each performance obligation is satisfied.
The model is mechanical but the application requires judgment, particularly around what counts as a separate performance obligation and how to allocate the price between obligations. Document the judgment for every material contract.
Common UAE applications
Software-as-a-Service: subscription revenue is recognised over the subscription term (monthly or daily). Setup fees should usually be allocated to the subscription period, not booked upfront, unless they represent a distinct performance obligation.
Trading: revenue is typically recognised at point in time (delivery transfers control to the buyer). Cost of goods sold is matched at the same point. Long-tail returns and warranty obligations need separate provisions.
Construction and project revenue
Long-term construction or service contracts are typically recognised over time using percentage-of-completion. The completion percentage is usually based on costs incurred relative to total estimated costs (input method) or physical milestones (output method).
If reliable estimates of total costs are not possible, recognise revenue equal to costs incurred until reliable estimation is possible. Anticipated losses are recognised in full immediately, not over the contract term.
Bundled offerings and gift cards
Bundles: a hardware-plus-service offering may have one combined price but two performance obligations. Allocate the price between them based on standalone selling prices. Recognise hardware revenue at delivery, service revenue over the service period.
Loyalty programs and gift cards: estimate breakage (the percentage of vouchers that will never be redeemed) and recognise that portion as revenue when underlying purchases occur. Document the breakage estimate and refresh it annually with actual redemption data.
This guide is general information, not professional advice. For situations that involve specific facts, talk to your accountant, or hire one of ours from the marketplace.