Key Takeaways
- Point-in-time recognition is the default under IFRS 15; the entity uses it whenever none of the three "over time" criteria in IFRS 15.35 are met.
- The five control-transfer indicators in IFRS 15.38 are not a checklist but a set of signals to weigh against the facts of the arrangement.
- Misjudging the transfer-of-control date by even one day can shift revenue into a different reporting period.
- Most goods sold with standard shipping terms (such as Incoterms FOB or DAP) trigger point-in-time recognition when delivery occurs or risk passes.
What is Revenue Recognition at a Point in Time?
IFRS 15.32 establishes a binary gate: a performance obligation is satisfied over time if it meets any one of the three criteria in IFRS 15.35. If none of those criteria is met, the obligation is satisfied at a point in time. The standard does not define the precise moment. Instead, IFRS 15.38 lists five indicators of when control has transferred: (a) the entity has a present right to payment, (b) the customer has legal title, (c) the entity has transferred physical possession, (d) the customer has the significant risks and rewards of ownership, and (e) the customer has accepted the asset.
No single indicator is determinative. On a straightforward product sale the indicators tend to converge at shipment or delivery. On more complex arrangements (goods delivered but subject to customer acceptance testing, or bill-and-hold contracts where physical possession never transfers) they diverge, and judgment is required. The auditor's task under ISA 540.13(a) is to evaluate whether management identified the correct moment by reference to the contract terms and the substance of the arrangement. Selecting a recognition date that ignores a substantive acceptance clause overstates revenue until the customer formally accepts.
IFRS 15.38(e) on customer acceptance deserves particular attention. When the contract includes an acceptance provision that is more than a formality, revenue cannot be recognised before acceptance occurs (IFRS 15.B86).
Worked example: Rossi Alimentari S.p.A.
Client: Italian food production company, FY2025, revenue €67M, IFRS reporter. Rossi ships a €480,000 consignment of premium olive oil to a German retail chain under Incoterms DAP (Delivered at Place). The contract specifies that title and risk transfer when the goods arrive at the buyer's warehouse in Munich. The buyer has 48 hours after delivery to inspect the shipment and reject non-conforming goods.
Step 1 — Determine whether recognition is over time or at a point in time
Rossi applies the IFRS 15.35 criteria. The customer does not simultaneously receive and consume benefits (this is a product, not a service), and Rossi's performance does not create an asset the customer controls as it is built because the oil already exists in finished form. Rossi could also redirect the shipment to another buyer before delivery, so the asset has an alternative use. None of the over-time criteria is met. Recognition occurs at a point in time.
Step 2 — Identify the point of control transfer
Under DAP, risk transfers at the buyer's named place. Rossi evaluates the IFRS 15.38 indicators. Physical possession transfers at the Munich warehouse. Legal title passes on delivery per the contract. The buyer assumes risk of loss upon receipt. Rossi has a present right to payment once delivery is confirmed.
Step 3 — Assess the acceptance clause
The 48-hour inspection window is contractual. Rossi's historical rejection rate for this customer over the past four years is 0.4% of shipments by value. Rossi concludes per IFRS 15.B86 that acceptance is substantially a formality because the goods are manufactured to an agreed specification and rejection is rare. Control transfers at delivery, not at expiry of the inspection window.
Step 4 — Recognise revenue
Rossi recognises the full €480,000 of allocated transaction price on the date the goods arrive at the Munich warehouse (14 March 2025). The shipment left Rossi's Italian facility on 11 March 2025; no revenue is recognised on that date because control had not yet transferred under DAP terms.
The €480,000 is recognised on 14 March 2025, defensible because all five IFRS 15.38 indicators converge at delivery and the acceptance clause is assessed as a formality based on a four-year historical rejection rate of 0.4%.
Why it matters in practice
Teams frequently recognise revenue at the shipment date rather than the delivery date for contracts with DAP or DDP Incoterms. Under those terms, risk does not pass until the goods reach the named destination. IFRS 15.38(d) points to the transfer of significant risks and rewards as one indicator of control, and shipping the goods is not the same as delivering them. The error is most common around period ends when goods are in transit on the reporting date.
When a contract includes a customer acceptance provision, practitioners often treat it as a formality without documenting why. IFRS 15.B86–B89 require the entity to assess whether acceptance is substantive. A bare conclusion stating "acceptance is a formality" without supporting data (historical rejection rates, specification conformity, prior dealings) does not satisfy the ISA 540.18 requirement to evaluate the reasonableness of assumptions.
Point-in-time recognition vs. over-time recognition
| Dimension | Point in time (IFRS 15.38) | Over time (IFRS 15.35) |
|---|---|---|
| Default status | Default; applies when none of the over-time criteria are met | Exception; requires meeting at least one of three criteria |
| When revenue appears | All at once on the control-transfer date | Progressively as performance occurs |
| Measurement focus | Identifying the single moment of control transfer | Selecting a method to measure progress toward completion |
| Typical fact patterns | Sale of finished goods, standard product shipments, discrete one-off services | Construction contracts, long-term service arrangements, licence arrangements with stand-ready obligations |
| Common audit risk | Revenue recorded before control actually transfers (goods in transit at period end) | Progress measure overstates completion, accelerating revenue into earlier periods |
The distinction is not about the nature of the good or service. It is about whether the IFRS 15.35 criteria are met. A manufactured product delivered in stages to a customer who controls each stage as it arrives could qualify for over-time recognition, while a consulting engagement delivered as a single final report might be point-in-time.
Related terms
Frequently asked questions
How do I determine the exact date of revenue recognition for goods in transit?
Match the recognition date to the point where the IFRS 15.38 control indicators are satisfied, which depends on the Incoterms or contractual risk-transfer clause. For FOB shipping point, that date is when the goods are loaded onto the carrier. For DAP, it is when the goods arrive at the buyer's location. IFRS 15.38(c)–(d) require you to look at possession and risk, not the invoice date.
Does customer acceptance always delay revenue recognition?
Not always. IFRS 15.B86 allows recognition before formal acceptance if the acceptance provision is a formality (the entity can objectively determine that the goods meet the agreed specifications). If acceptance is substantive (the customer has genuine discretion to reject), revenue waits until acceptance occurs. Document the basis for that conclusion with historical data or specification analysis.
Can I recognise revenue at a point in time for a service contract?
Yes. If the service does not meet any of the three IFRS 15.35 over-time criteria, point-in-time recognition applies. The most common reason a service fails those criteria is that the entity's work has alternative use and the entity does not have an enforceable right to payment for performance completed to date. IFRS 15.38 then governs when control of the completed service transfers. This is uncommon for ongoing services but can arise for discrete, one-off deliverables.