IFRS 15 / ASC 606
Definition
The converged international (IFRS 15) and US (ASC 606) standards that replaced predecessor revenue rules from 2018. Both apply a five-step model: identify the contract, identify performance obligations, determine the transaction price, allocate the price across obligations, and recognise revenue when each obligation is satisfied. Fraud attacks these steps by fabricating contracts, suppressing obligations, or claiming satisfaction prematurely.
- IFRS standard
- IFRS 15, international
- US equivalent
- ASC 606
- Effective from
- 2018, replacing predecessor revenue rules
- Model
- Five-step revenue recognition model
- Fraud relevance
- Attacked via fabricated contracts or premature satisfaction claims
Common questions
What are the five steps a company must follow under IFRS 15 / ASC 606?+
Identify the contract with a customer, identify the separate performance obligations in it, determine the transaction price, allocate that price across the obligations, then recognise revenue as each obligation is satisfied. Fraud examiners trace each step to see where a manipulation was inserted.
How does an examiner spot revenue fraud built around this standard?+
Common red flags include contracts that were fabricated or altered near period end, performance obligations quietly omitted from allocation so more revenue lands upfront, and revenue booked before the obligation the customer actually paid for was genuinely satisfied. Comparing contract terms against shipping, delivery, or service records usually exposes the gap.
Related terms
- Bill-and-Hold
- An arrangement in which a seller bills a customer but retains physical possession of the product. Revenue recognition depends on control and...
- Bill-and-Hold Arrangement
- A transaction in which a seller invoices a customer for goods that remain physically on the seller's premises at the customer's request....
- Channel Stuffing
- Excessive shipments to distributors or other intermediaries, sometimes used with concealed terms to inflate revenue. Whether recognition is improper depends on the...
- Days Sales Outstanding (DSO)
- Days sales outstanding estimates the collection period by comparing receivables with average daily relevant sales over a stated period. Definitions and inputs...
- Fictitious Revenue
- Fictitious revenue is an entry representing a sale or earning event that lacks the claimed economic substance. Investigators test contracts, delivery, customer...
- Performance Obligation
- Under IFRS 15 and ASC 606, the distinct promise to transfer a good or service to a customer. Revenue can only be...
- Premature Revenue Recognition
- Premature revenue recognition records revenue before the applicable reporting requirements are satisfied, potentially shifting results between periods. Investigators examine contracts, performance, control...
- Round-Tripping
- A circular transaction in which cash or assets flow between two or more related parties so that each records revenue without any...
- Side Letter
- An informal or undisclosed written agreement between a buyer and seller that modifies the terms of the primary contract. Side letters are...