# Revenue Recognition Memo: [Contract or arrangement name]

> Technical accounting memo for one customer contract or one contract
> type: contract summary, the five-step analysis (contract, performance
> obligations, transaction price, allocation, timing), principal versus
> agent, contract costs, modifications, disclosure, journal entries and
> conclusion. Structure aligned with the five-step model in IFRS 15
> Revenue from Contracts with Customers (effective for annual periods
> beginning on or after 2018-01-01) and FASB ASC Topic 606 and Subtopic
> 340-40, cited by standard and paragraph number only. Obtain the
> standard for the normative text. Replace every `[bracketed]` value and
> every row marked *Example*. This is a document format, not
> accounting, audit, tax, legal or financial advice.

<!--
Guidance: How to use this template
- Purpose: record how revenue on a specific contract (or a portfolio of
  similar contracts) is recognised, with the facts, the judgement at
  each step and the numbers, so an auditor or a new controller can
  reach the same answer from the memo alone.
- Write one memo per contract type or per significant contract. A new
  pricing model, a bundle, a large modification or a new channel is a
  trigger. Routine contracts are covered by the revenue policy in the
  Accounting Policy Manual (`finance/accounting-policy-manual`).
- Cite paragraph numbers, never copy or paraphrase standard text. Your
  reader has the standard; the memo adds the facts and the reasoning.
- The worked example uses the fictional Corvid Commerce Group (IFRS
  reporter, functional currency EUR, calendar year) selling a bundle of
  in-store terminals, a three-year SaaS subscription and implementation
  to a fictional retailer. Every number is recomputed in the memo.
- Related templates: Technical Accounting Memo
  (`finance/technical-accounting-memo`) for the generic position-paper
  format, SaaS Metering and Billing Design
  (`architecture/saas-metering-billing-design`) for the billing system
  that feeds the numbers, Journal Entry Support
  (`finance/journal-entry-support`) and Financial Statement Disclosure
  Checklist (`finance/financial-statement-disclosure-checklist`).
-->

## Document control

<!-- Guidance: Identify the contract precisely (customer, contract ID, signature date) and the framework. A memo without a contract reference cannot be audited. -->

| Field | Value |
|---|---|
| Document ID | [RRM-YYYY-NNN] *Example:* RRM-2027-004 |
| Contract or contract type | [Customer, contract ID, signature date] *Example:* Larkspur Outfitters, MSA-LO-2027-01, signed 2027-01-15 |
| Reporting entity | [Legal entity] *Example:* Corvid Commerce GmbH (CC-DE, Germany), consolidated into Corvid Commerce Group plc |
| Framework | [IFRS 15 / ASC 606 / both] *Example:* IFRS 15 (group statements under UK-adopted international accounting standards and IFRS as issued by the IASB); ASC 606 comparison in section 13 |
| Currency and units | [EUR, whole euros unless stated] |
| First reporting period affected | [Period] *Example:* Q1 2027 |
| Version | [0.1] |
| Status | [Draft / In review / Final] |
| Owner | [@technical-accounting-lead] |
| Approvers/reviewers | [@group-controller], [@cfo], [@revenue-operations-lead] |
| Last updated | YYYY-MM-DD |
| Classification | [Confidential] |
| Auditor shared | [Yes / No, date] |

### Approvals

| Role | Name | Decision | Date |
|---|---|---|---|
| Preparer, technical accounting | [@name] | [Prepared] | YYYY-MM-DD |
| Group controller | [@name] | [Approve / Return] | YYYY-MM-DD |
| Chief financial officer | [@name] | [Approve / Return] | YYYY-MM-DD |

### Revision history

| Version | Date | Author | Change summary |
|---|---|---|---|
| 0.1 | YYYY-MM-DD | [@name] | First draft from the signed contract |
| 0.5 | YYYY-MM-DD | [@name] | *Example:* SSP evidence from pricing committee added |
| 1.0 | YYYY-MM-DD | [@name] | *Example:* Approved, shared with the external auditor |

## Contents

<!-- Guidance: Keep this list aligned with the headings when you add or remove sections. -->

1. [Summary and conclusion](#1-summary-and-conclusion)
2. [Contract facts and documents reviewed](#2-contract-facts-and-documents-reviewed)
3. [Step 1: Contract identification and combination](#3-step-1-contract-identification-and-combination)
4. [Step 2: Performance obligations](#4-step-2-performance-obligations)
5. [Step 3: Transaction price](#5-step-3-transaction-price)
6. [Step 4: Allocation to performance obligations](#6-step-4-allocation-to-performance-obligations)
7. [Step 5: Timing of recognition](#7-step-5-timing-of-recognition)
8. [Principal versus agent](#8-principal-versus-agent)
9. [Contract costs](#9-contract-costs)
10. [Contract modifications and renewals](#10-contract-modifications-and-renewals)
11. [Journal entries and financial statement effect](#11-journal-entries-and-financial-statement-effect)
12. [Presentation and disclosure](#12-presentation-and-disclosure)
13. [IFRS and US GAAP comparison](#13-ifrs-and-us-gaap-comparison)
14. [Controls, systems and monitoring](#14-controls-systems-and-monitoring)
15. [Glossary and references](#15-glossary-and-references)
16. [Standard and licence note](#standard-and-licence-note)

## 1. Summary and conclusion

<!-- Guidance: Write this last. State the answer in five to eight lines: how many performance obligations, how the price is split, when each part is recognised, the main judgement and its effect on the first year. A reviewer should be able to stop reading here. -->

State the conclusion first, then the judgements that drive it. Keep the
summary factual and quantified. If a judgement is close, say so and
point to the section that sets out the alternative view, because the
auditor will look for it.

*Example:* Corvid Commerce GmbH signed a three-year arrangement with
Larkspur Outfitters on 2027-01-15 for 200 in-store terminals, a 36-month
subscription to the Corvid retail platform and a fixed-fee
implementation. The fixed consideration of EUR 390,000 is allocated to
three performance obligations on a relative stand-alone selling price
basis: terminals EUR 106,537 (recognised at delivery on 2027-02-01),
implementation EUR 26,634 (recognised over February and March 2027 as
hours are incurred) and the subscription EUR 256,829 (recognised evenly
over 36 months from go-live on 2027-04-01, EUR 7,134 per month). Usage
fees above the monthly allowance are allocated wholly to the month in
which the usage occurs. FY2027 revenue from the fixed consideration is
EUR 197,378, and a contract liability of EUR 12,622 remains at
2027-12-31. Corvid is principal for the terminals. The main judgement is
that the terminals and implementation are distinct from the subscription
(section 4).

| Item | Conclusion | Section |
|---|---|---|
| Contract exists and is not combined | Yes, single contract | 3 |
| Performance obligations | [N] *Example:* 3 (terminals, implementation, subscription as a series) | 4 |
| Fixed transaction price | [Amount] *Example:* EUR 390,000 | 5 |
| Variable consideration | [Treatment] *Example:* usage fees, allocated to the month of usage | 5, 6 |
| Significant financing component | [Yes / No] *Example:* No, effect assessed as immaterial | 5 |
| Principal or agent | [Principal / Agent] *Example:* Principal for terminals | 8 |
| FY revenue effect | [Amount] *Example:* EUR 197,378 fixed plus usage fees as earned | 11 |

## 2. Contract facts and documents reviewed

<!-- Guidance: List the documents you read and the facts that matter for each step. Facts first, analysis later. Common pitfall: relying on the sales deck or the quote instead of the signed contract and its order forms, side letters and email commitments. -->

Read every document that forms part of the enforceable arrangement:
master agreement, order forms, statements of work, price schedules,
service-level terms, side letters and any written commitments made by
sales staff. Ask the deal team directly whether any undocumented
promises exist, such as free extra months, price protection or a
promise to build a feature, and record the answer with the name of the
person who confirmed it.

### 2.1 Documents reviewed

| Ref | Document | Date | Source |
|---|---|---|---|
| DOC-001 *(Example)* | Master services agreement MSA-LO-2027-01 | 2027-01-15 | Contract repository |
| DOC-002 *(Example)* | Order form 1: terminals, subscription, implementation | 2027-01-15 | CPQ system |
| DOC-003 *(Example)* | Statement of work: implementation | 2027-01-15 | Professional services |
| DOC-004 *(Example)* | Price list and stand-alone sales analysis FY2026 | 2027-01-05 | Pricing committee |
| DOC-005 *(Example)* | Deal desk confirmation: no side agreements | 2027-01-20 | Email from [@deal-desk] |
| [DOC-NNN] | [Document] | YYYY-MM-DD | [Source] |

### 2.2 Key terms

| Term | Contract position *(Example)* |
|---|---|
| Parties | Corvid Commerce GmbH (seller), Larkspur Outfitters (fictional retailer, customer) |
| Goods | 200 handheld point-of-sale terminals, delivered 2027-02-01, title and risk pass on delivery to customer stores |
| Services | Corvid retail platform subscription, 36 months from go-live (2027-04-01 to 2030-03-31), includes 5,000,000 transactions per month |
| Implementation | Configuration, data migration and staff training, fixed fee, planned 2027-02-01 to 2027-03-31 |
| Fixed consideration | EUR 390,000 for the bundle |
| Variable consideration | EUR 0.02 per transaction above the monthly allowance, billed monthly in arrears |
| Billing | EUR 150,000 on signature; EUR 6,666.67 per month for 36 months from go-live (EUR 240,000 in total) |
| Termination | Customer may terminate for convenience only with payment of all remaining fixed fees; either party for material breach |
| Warranty | 12-month standard warranty on terminals (assurance only, no extended warranty sold) |
| Renewal | Optional 12-month renewal at the then-current list price |

## 3. Step 1: Contract identification and combination

<!-- Guidance: Confirm each contract-existence criterion with evidence, then decide whether this contract must be combined with others signed at or near the same time with the same customer. Pitfall: missing a separate order form signed a week later that was negotiated as one package. -->

Assess the criteria in IFRS 15 paragraph 9 (ASC 606-10-25-1) one by
one, with evidence for each. Collectability deserves its own line,
supported by the credit check or payment history, because a weak
customer changes the whole accounting model for the contract. Record
the contract term for accounting purposes: it is the period during
which both parties have enforceable rights and obligations, which can
be shorter than the stated term when the customer can cancel without a
substantive penalty.

Then consider combination under IFRS 15 paragraph 17 (ASC 606-10-25-9).
List every other contract with the same customer or its related parties
signed within a window your policy defines, and record why each one is
or is not combined.

| Criterion (paragraph reference) | Evidence | Met? |
|---|---|---|
| Approval and commitment (IFRS 15.9(a)) | *Example:* Signed by both parties' authorised signatories, DOC-001 | Yes |
| Rights identifiable (IFRS 15.9(b)) | *Example:* Order form lists each item, DOC-002 | Yes |
| Payment terms identifiable (IFRS 15.9(c)) | *Example:* Billing schedule in DOC-002 | Yes |
| Commercial substance (IFRS 15.9(d)) | *Example:* Cash flows of Corvid change in amount and timing | Yes |
| Collection probable (IFRS 15.9(e)) | *Example:* Credit score A, no overdue history, credit limit approved | Yes |
| [Criterion] | [Evidence] | [Yes / No] |

*Example conclusion:* One contract exists from 2027-01-15. The
enforceable term is 36 months of subscription plus the delivery and
implementation period, because early termination requires payment of
all remaining fixed fees. No other contract with Larkspur Outfitters
was signed within 90 days, so no combination applies.

## 4. Step 2: Performance obligations

<!-- Guidance: List every promise in the contract, explicit or implied, then decide which promises are distinct. Show the reasoning for each pair that could be combined. Pitfall: treating set-up activities that transfer nothing to the customer as a separate obligation, or the opposite, bundling hardware into the service because they are sold together. -->

Start with a complete inventory of promised goods and services,
including implied promises created by customary business practice.
Exclude administrative tasks that do not transfer a good or service,
such as internal account set-up. For each promise, record whether the
customer can benefit from it on its own or together with readily
available resources, and whether it is separately identifiable within
the context of the contract. Reference IFRS 15 paragraphs 22 to 30
(ASC 606-10-25-14 to 25-22) for the criteria and write your evidence in
the table; do not restate the criteria.

Decide next whether any obligation is a series of distinct goods or
services that are substantially the same and transfer with the same
pattern (IFRS 15.22(b) and 23; ASC 606-10-25-14(b) and 25-15). A
monthly platform subscription is often accounted for as a series, which
matters for variable consideration in section 6.

Consider customer options for additional goods or services. An option
that gives a discount the customer would not receive without entering
into the contract is a material right and a separate obligation (IFRS
15 B39 to B43; ASC 606-10-55-41 to 55-45). A renewal at the then-current
list price is not a material right.

| Promise | Capable of being distinct (evidence) | Distinct in context (evidence) | Conclusion |
|---|---|---|---|
| POB-01 Terminals *(Example)* | Standard devices, usable with other vendors' POS software; Corvid and others sell them separately | Not modified by the platform; platform works with other certified devices; no significant integration service | Distinct |
| POB-02 Implementation *(Example)* | Configuration and training performed by several partners in the market | Does not significantly customise or modify the platform; standard configuration tools | Distinct |
| POB-03 Subscription *(Example)* | Sold separately at renewal | Delivered as monthly service periods, substantially the same | Distinct, series of monthly periods |
| Warranty *(Example)* | Assurance-type warranty only | Not sold separately, no extra service | Not a performance obligation; cost provided under IAS 37 |
| Renewal option *(Example)* | Priced at then-current list | No discount | Not a material right |
| [Promise] | [Evidence] | [Evidence] | [Conclusion] |

The most sensitive judgement in a hardware and software bundle is
usually whether the device and the service are highly interdependent.
In the example, the terminals run a general operating system, other
certified point-of-sale applications run on them, and the platform also
runs on third-party devices. That evidence supports a distinct
conclusion. If Corvid's terminals only worked with the Corvid platform
and the platform only worked with Corvid terminals, the analysis would
be closer and you would document the alternative of a single combined
obligation recognised over the subscription term.

## 5. Step 3: Transaction price

<!-- Guidance: Determine the amount Corvid expects to be entitled to: fixed amounts, variable amounts after the constraint, significant financing, non-cash consideration and consideration payable to the customer. Pitfall: forgetting rebates, credits or marketing funds paid to the customer, which reduce revenue. -->

Build the transaction price from its components (IFRS 15 paragraphs 46
to 72; ASC 606-10-32-2 to 32-27). For each variable element, record the
estimation method (expected value or most likely amount), the inputs,
and whether the constraint applies. Explain your constraint conclusion
in terms of the factors that make a reversal more or less likely, such
as dependence on customer behaviour, a long uncertainty period or
limited experience with similar contracts.

Assess financing when the timing of payments differs significantly from
the timing of transfer. Note the practical expedient for periods of
one year or less (IFRS 15.63; ASC 606-10-32-18) and the reasons why a
difference in timing may arise for purposes other than financing.

| Component | Amount or method | Constraint or adjustment | Included in fixed allocation? |
|---|---|---|---|
| Fixed bundle price *(Example)* | EUR 390,000 | None | Yes |
| Usage fees above allowance *(Example)* | EUR 0.02 per transaction; no usage history for this customer | Fully constrained at inception (IFRS 15 paragraphs 56 to 58), so the estimate included is nil; allocated wholly to the month of usage when the uncertainty resolves (section 6) | No |
| Service-level credits *(Example)* | Up to 5% of the monthly fee if uptime falls below the contract level | History shows no credits in 24 months; reviewed quarterly | Not reduced; monitored |
| Financing component *(Example)* | Upfront EUR 150,000 exceeds value of terminals and implementation by EUR 16,829 | Advance relates to subscription periods up to 36 months; effect at 5% assessed as immaterial (below EUR 2,000 a year) | No adjustment |
| Consideration payable to customer | [Rebates, credits, marketing funds] *Example:* None | [Treatment] | [Yes / No] |
| Non-cash consideration | [Description] *Example:* None | [Fair value at inception] | [Yes / No] |

*Example arithmetic:* the upfront payment of EUR 150,000 less the
allocated amounts for the terminals (EUR 106,537) and implementation
(EUR 26,634) leaves EUR 16,829 paid in advance for the subscription.
The financing assessment uses this excess, not the full upfront amount.

## 6. Step 4: Allocation to performance obligations

<!-- Guidance: Allocate the transaction price on relative stand-alone selling prices. Show the evidence for each SSP, the method (observable price, adjusted market assessment, expected cost plus margin, residual), and recompute the split. Pitfall: using list prices that nobody pays as SSP. -->

Determine a stand-alone selling price for each obligation at contract
inception (IFRS 15 paragraphs 76 to 80; ASC 606-10-32-31 to 32-35).
Prefer observable prices from stand-alone sales to similar customers.
Where none exist, use an estimation method and explain why it is the
best evidence available. Keep the SSP study as a separate, dated
document approved by the pricing or revenue committee, and refresh it
at least annually.

Allocate any discount proportionately unless the conditions for
allocating it to fewer obligations are met (IFRS 15 paragraphs 81 to
83; ASC 606-10-32-36 to 32-38). Allocate variable consideration
entirely to one obligation or to one distinct period of a series when
the conditions in IFRS 15 paragraphs 84 to 86 (ASC 606-10-32-39 to
32-41) are met, and document both conditions explicitly.

The relative allocation formula used below is:

$$
\text{Allocated}_i = \text{Transaction price} \times \frac{\text{SSP}_i}{\sum_j \text{SSP}_j}
$$

| Obligation | SSP method and evidence | SSP (EUR) | Share of total SSP | Allocated price (EUR) |
|---|---|---|---|---|
| POB-01 Terminals *(Example)* | Observable: median stand-alone price EUR 560 per unit, 2026 sales, 200 units | 112,000 | 27.32% | 106,537 |
| POB-02 Implementation *(Example)* | Expected cost EUR 20,000 plus 40% margin | 28,000 | 6.83% | 26,634 |
| POB-03 Subscription *(Example)* | Observable renewals: EUR 7,500 per month, 36 months | 270,000 | 65.85% | 256,829 |
| Total | | 410,000 | 100.00% | 390,000 |

*Example check:* EUR 390,000 / EUR 410,000 = 0.95122, so each
obligation receives 95.122% of its SSP and the bundle discount of
EUR 20,000 (4.88% of total SSP) is spread proportionately. The allocated
amounts add back to EUR 390,000 (106,537 + 26,634 + 256,829). The usage
fee relates specifically to Corvid's effort in a given month and
allocating it to that month is consistent with the allocation
objective, so it is excluded from the relative allocation.

## 7. Step 5: Timing of recognition

<!-- Guidance: For each obligation decide over time or point in time, and for over-time obligations the measure of progress. Show the revenue schedule. Pitfall: recognising hardware revenue on shipment when control passes only on installation or acceptance. -->

For each obligation, test whether one of the over-time criteria is met
(IFRS 15 paragraph 35; ASC 606-10-25-27). If none is met, identify the
point in time when control passes, using the indicators in IFRS 15
paragraph 38 (ASC 606-10-25-30): right to payment, legal title,
physical possession, risks and rewards, and acceptance. For over-time
obligations choose an output or input method that depicts performance
(IFRS 15 paragraphs 39 to 45) and apply it consistently to similar
obligations.

Customer acceptance clauses need care. When acceptance is a formality
because the terminals meet agreed specifications that Corvid can test
before shipment, it does not delay recognition. When acceptance depends
on subjective criteria or on the customer's environment, recognition
waits for acceptance.

| Obligation | Over time or point in time | Measure of progress or trigger | Period |
|---|---|---|---|
| POB-01 Terminals *(Example)* | Point in time | Delivery to stores; title, possession and risk pass; acceptance is a formality | 2027-02-01 |
| POB-02 Implementation *(Example)* | Over time (customer simultaneously receives and consumes) | Input method: hours incurred / total estimated hours (400) | 2027-02-01 to 2027-03-31 |
| POB-03 Subscription *(Example)* | Over time, series | Time elapsed, straight line, EUR 256,829 / 36 = EUR 7,134 per month | 2027-04-01 to 2030-03-31 |
| Usage fees *(Example)* | Over time, allocated to the month | Transactions above allowance in the month | Monthly |

### 7.1 Revenue schedule

| Period | Terminals | Implementation | Subscription | Total fixed (EUR) |
|---|---|---|---|---|
| FY2027 *(Example)* | 106,537 | 26,634 | 64,207 (9 months) | 197,378 |
| FY2028 *(Example)* | 0 | 0 | 85,610 (12 months) | 85,610 |
| FY2029 *(Example)* | 0 | 0 | 85,610 (12 months) | 85,610 |
| FY2030 *(Example)* | 0 | 0 | 21,402 (3 months) | 21,402 |
| Total | 106,537 | 26,634 | 256,829 | 390,000 |

*Example check:* monthly subscription revenue is EUR 256,829 / 36 =
EUR 7,134.14. Nine months give EUR 64,207, twelve months EUR 85,610 and
the last three months EUR 21,402 after rounding, so the four years add
to EUR 256,829. Implementation was split by hours: 160 hours in February
(EUR 10,654) and 240 hours in March (EUR 15,980), totalling 400 hours and
EUR 26,634.

### 7.2 Recognition flow

The diagram shows when each part of the bundle reaches revenue.

```mermaid
flowchart LR
  A[Signature 2027-01-15<br/>bill EUR 150,000] --> B[Terminals delivered 2027-02-01<br/>revenue EUR 106,537]
  A --> C[Implementation Feb to Mar 2027<br/>revenue EUR 26,634 by hours]
  C --> D[Go-live 2027-04-01]
  D --> E[Subscription 36 months<br/>EUR 7,134 per month]
  D --> F[Usage fees above allowance<br/>recognised in month of usage]
```

## 8. Principal versus agent

<!-- Guidance: Needed whenever a third party is involved in delivering a good or service. Identify the specified good or service, then decide whether the entity controls it before transfer. Pitfall: deciding on the indicators alone without first answering the control question. -->

When another party is involved in providing goods or services, first
identify each specified good or service, then decide whether the entity
controls it before it is transferred to the customer (IFRS 15
paragraphs B34 to B38; ASC 606-10-55-36 to 55-40). Use the indicators,
such as primary responsibility for fulfilment, inventory risk and
pricing discretion, to support the control conclusion, not to replace
it. A principal recognises revenue gross; an agent recognises the net
fee or commission.

| Specified good or service | Third party | Control evidence | Conclusion |
|---|---|---|---|
| Terminals *(Example)* | Fictional OEM manufacturer, drop-ships to stores | Corvid commits to purchase volumes in advance (inventory risk), sets the customer price, handles all returns and warranty claims, and the customer contracts only with Corvid | Principal, gross revenue |
| Payment processing *(Example)* | Fictional acquiring bank | Processing is provided by the acquirer under its own contract with the merchant; Corvid only routes transactions | Not part of this contract |
| [Good or service] | [Third party] | [Evidence] | [Principal / Agent] |

## 9. Contract costs

<!-- Guidance: Capitalise incremental costs of obtaining a contract and qualifying fulfilment costs, then amortise them on a basis consistent with the transfer of the related goods and services. Pitfall: amortising a commission over the initial term when renewals carry no commensurate commission. -->

Identify costs that would not have been incurred if the contract had
not been obtained, such as sales commissions, and decide whether to
capitalise them (IFRS 15 paragraphs 91 to 94; ASC 340-40-25-1 to 25-4).
Record whether the practical expedient for amortisation periods of one
year or less is elected. Fulfilment costs that are not within another
standard are capitalised only when the criteria in IFRS 15 paragraph 95
(ASC 340-40-25-5) are met.

Amortise the asset on a systematic basis consistent with the transfer
of the related goods or services (IFRS 15 paragraph 99; ASC
340-40-35-1). When the commission relates to several obligations
delivered at different times, split it. Consider anticipated renewals
when the renewal commission is not commensurate with the initial one.
Test the asset for impairment against the remaining consideration less
costs to be incurred.

*Example:* Sales commission of 4% on the fixed contract value is
EUR 15,600 (EUR 390,000 x 4%). Corvid capitalises it and splits it by
the allocated transaction price: 34.15% relates to the terminals and
implementation (EUR 133,171 / EUR 390,000), so EUR 5,327 is expensed in
FY2027 as those obligations are satisfied. The remaining EUR 10,273 is
amortised over the 36 subscription months at EUR 285 per month. Renewal
commissions equal 4% of the renewal value, which Corvid considers
commensurate, so renewals are not included in the amortisation period.

| Cost item | Amount (EUR) | Capitalised? | Amortisation basis | FY2027 expense | Asset at 2027-12-31 |
|---|---|---|---|---|---|
| Sales commission, point-in-time part *(Example)* | 5,327 | Yes | With terminals and implementation | 5,327 | 0 |
| Sales commission, subscription part *(Example)* | 10,273 | Yes | 36 months straight line | 2,568 | 7,705 |
| Implementation staff time *(Example)* | 20,000 | No, expensed as incurred (cost of POB-02) | Not applicable | 20,000 | 0 |
| Total commission | 15,600 | | | 7,895 | 7,705 |

## 10. Contract modifications and renewals

<!-- Guidance: Describe how future changes in scope or price will be accounted for, and analyse any modification that already exists. Pitfall: treating every upsell as a new contract without checking that the price reflects stand-alone selling prices. -->

Set out the decision path for modifications under IFRS 15 paragraphs
18 to 21 (ASC 606-10-25-10 to 25-13): a separate contract, a
termination of the old contract and creation of a new one
(prospective), or a cumulative catch-up adjustment. The outcome depends
on whether the added goods or services are distinct and whether the
price increase reflects their stand-alone selling prices. Record how
the billing system will flag modifications so the revenue team reviews
them before the period closes.

```mermaid
flowchart TD
  M[Modification approved] --> Q1{Adds distinct goods or services<br/>priced at SSP?}
  Q1 -- Yes --> S[Separate contract]
  Q1 -- No --> Q2{Remaining goods or services<br/>distinct from those transferred?}
  Q2 -- Yes --> P[Prospective: treat as termination<br/>and new contract]
  Q2 -- No --> C[Cumulative catch-up<br/>on existing contract]
```

| Scenario | Expected treatment | Rationale |
|---|---|---|
| MOD-001 *(Example)* Customer adds 50 terminals at the list SSP | Separate contract | Distinct goods at SSP |
| MOD-002 *(Example)* Customer adds 20 stores to the subscription at a 30% discount for the remaining term | Prospective | Remaining months are distinct; price is not SSP |
| MOD-003 *(Example)* Price reduced for service failure in month 10 | Variable consideration review first; modification only if it changes scope | Price concession linked to past performance |
| Renewal at list price *(Example)* | New contract at renewal date | No material right |

## 11. Journal entries and financial statement effect

<!-- Guidance: Show the entries for the first year, with the balance sheet position at year end. Reconcile billing to revenue through contract assets and liabilities. Pitfall: recording receivables before the right to consideration is unconditional. -->

Record a receivable for an invoice only when the right to payment is
unconditional: the invoice is due, or the contract is non-cancellable
so that the amount is owed regardless of performance. Otherwise
recognise the contract liability only when cash is received. In the
example the contract can be terminated only on payment of all remaining
fixed fees, and the signature invoice is due on issue, so JE-01 books a
receivable.

Prepare entries for each event in the first reporting period and a
year-end roll-forward of contract balances. A receivable exists when
the right to consideration is unconditional (only the passage of time
is required); a contract asset exists when revenue is recognised
before that point; a contract liability exists when consideration is
received or due before the related revenue is recognised (IFRS 15
paragraphs 105 to 109; ASC 606-10-45-1 to 45-4). Present the position
net at contract level.

| JE | Date | Debit | Credit | Amount (EUR) | Description |
|---|---|---|---|---|---|
| JE-01 *(Example)* | 2027-01-15 | Trade receivable | Contract liability | 150,000 | Invoice on signature (unconditional right under payment terms) |
| JE-02 *(Example)* | 2027-02-01 | Contract liability | Revenue: hardware | 106,537 | Terminals delivered |
| JE-03 *(Example)* | Feb and Mar 2027 | Contract liability | Revenue: services | 26,634 | Implementation by hours |
| JE-04 *(Example)* | Monthly from Apr 2027 | Trade receivable | Contract liability | 6,667 | Monthly invoice |
| JE-05 *(Example)* | Monthly from Apr 2027 | Contract liability | Revenue: subscription | 7,134 | Subscription month |
| JE-06 *(Example)* | Dec 2027 | Trade receivable | Revenue: usage | 24,000 | 1,200,000 transactions above allowance x EUR 0.02 |
| JE-07 *(Example)* | 2027-01-15 | Contract cost asset | Commission payable | 15,600 | Commission capitalised |
| JE-08 *(Example)* | FY2027 | Selling expense | Contract cost asset | 7,895 | Commission amortisation (5,327 + 2,568) |

### 11.1 Contract liability roll-forward

| Line | FY2027 (EUR) |
|---|---|
| Opening balance *(Example)* | 0 |
| Billed fixed consideration (150,000 + 9 x 6,666.67) *(Example)* | 210,000 |
| Revenue recognised from fixed consideration *(Example)* | (197,378) |
| Closing contract liability *(Example)* | 12,622 |

*Example check:* the closing contract liability equals the excess of
billing over revenue at contract level: EUR 210,000 less EUR 197,378 is
EUR 12,622. Over the full term, subscription billing of EUR 240,000
plus the EUR 16,829 advance from the upfront invoice equals the
EUR 256,829 allocated to the subscription, so the liability unwinds to
zero at 2030-03-31.

## 12. Presentation and disclosure

<!-- Guidance: Identify what this contract adds to the group's revenue note. Pitfall: forgetting remaining performance obligations, which change every time a multi-year contract is signed. -->

Map the contract to the revenue disclosures the group already makes:
disaggregation of revenue (IFRS 15 paragraph 114; ASC 606-10-50-5),
contract balances (IFRS 15 paragraphs 116 to 118; ASC 606-10-50-8 to
50-10), remaining performance obligations (IFRS 15 paragraphs 120 to
122; ASC 606-10-50-13 to 50-15), significant judgements (IFRS 15
paragraphs 123 to 126) and contract cost assets (IFRS 15 paragraphs 127
and 128). Under IFRS 18, which applies from 2027-01-01, revenue sits in
the operating category of the statement of profit or loss; check the
group's IFRS 18 mapping in IFRS 18 Transition Plan
(`finance/ifrs-18-transition-plan`).

| Disclosure | Contribution from this contract at 2027-12-31 *(Example)* |
|---|---|
| Disaggregation | Hardware EUR 106,537 (point in time); services and subscription EUR 90,841 plus usage EUR 24,000 (over time) |
| Contract liabilities | EUR 12,622 |
| Remaining performance obligations | EUR 192,622 (27 subscription months x EUR 7,134.14, rounded); about EUR 85,610 within 12 months |
| Contract cost assets | EUR 7,705 |
| Significant judgements | Distinct terminals, SSP of subscription, usage allocation |

*Example check:* remaining obligations equal the allocated subscription
price not yet recognised: EUR 256,829 less EUR 64,207 is EUR 192,622.
IFRS 15 paragraph 121 offers only two exemptions from the remaining
performance obligation disclosure: contracts with an original expected
duration of one year or less, and revenue recognised at the amount the
entity has a right to invoice (paragraph B16). Neither applies here,
because the contract runs for three years and the fixed fee is billed
on a schedule that differs from the value transferred. IFRS 15 has no
equivalent of the US GAAP optional exemption in ASC 606-10-50-14A for
variable consideration allocated wholly to a distinct period of a
series. Under IFRS, future usage fees are therefore part of the
remaining performance obligation to the extent they are included in the
transaction price after the constraint. In the example they are fully
constrained (section 5), so the figure is EUR 192,622 and the note
explains that usage-based fees are excluded because they are
constrained. Revisit this when usage history supports an estimate that
is highly probable not to reverse; from then the unconstrained amount
for the remaining term enters the figure. Under ASC 606 the group could
instead elect the 50-14A exemption and state the election (ASC
606-10-50-15).

## 13. IFRS and US GAAP comparison

<!-- Guidance: Complete this section only when a US GAAP reporting package, a US parent or a dual listing needs it. Keep it to differences that change the numbers or the disclosures. -->

IFRS 15 and ASC 606 were developed jointly and most outcomes are the
same. Differences that commonly matter for a SaaS and hardware business
are listed below; confirm each against the current text of both
standards, since amendments after 2014 were not always converged.

| Topic | IFRS 15 | ASC 606 / 340-40 | Effect in the example |
|---|---|---|---|
| Collectability threshold | "Probable" meaning more likely than not, as the term is used across IFRS (see the IFRS 15 Basis for Conclusions) | "Probable" with its US GAAP meaning, a higher threshold | None, customer well rated |
| Remaining performance obligation exemptions | One-year contracts and right-to-invoice amounts only (IFRS 15 paragraph 121) | Adds optional exemptions for variable consideration (ASC 606-10-50-14 and 50-14A) | Usage fees excluded under IFRS only because they are constrained; under US GAAP they could be excluded by election |
| Shipping and handling | No policy election | Policy election to treat as fulfilment activity (ASC 606-10-25-18B) | None, delivery is fulfilment |
| Sales taxes | Assess jurisdiction by jurisdiction | Policy election to present net (ASC 606-10-32-2A) | VAT presented net under both |
| Immaterial promises | No explicit relief | May be disregarded if immaterial (ASC 606-10-25-16A) | None identified |
| Contract cost impairment | Reversal permitted | Reversal prohibited | None |
| Interim disclosures | IAS 34 | More extensive interim disclosure | Reporting package only |

## 14. Controls, systems and monitoring

<!-- Guidance: Say how the conclusion becomes numbers every month: the billing and revenue system set-up, the controls that check it, and the triggers for re-assessment. Pitfall: a perfect memo that the billing system does not implement. -->

A revenue memo is only as reliable as the system that applies it.
Document how the obligations, SSPs and recognition patterns are
configured in the billing and revenue sub-ledger, and who checks the
configuration. Describe the monthly controls that compare billing,
usage and revenue, and the triggers that send a contract back to the
technical accounting team. Link the controls to the Risk and Control
Matrix (`compliance/risk-control-matrix`). For the design of the
usage pipeline and rating engine, see SaaS Metering and Billing Design
(`architecture/saas-metering-billing-design`).

| Control ID | Control | Frequency | Owner | Evidence |
|---|---|---|---|---|
| REV-C-001 *(Example)* | New bundle or non-standard terms routed to technical accounting before signature | Per deal | [@deal-desk] | Deal desk ticket |
| REV-C-002 *(Example)* | Revenue schedule set-up reviewed against this memo | Per contract | [@revenue-accountant] | Sign-off in sub-ledger |
| REV-C-003 *(Example)* | Usage above allowance reconciled from meter to invoice to revenue | Monthly | [@revenue-operations] | Reconciliation file |
| REV-C-004 *(Example)* | SSP study refreshed and approved | Annually | [@pricing-committee] | Minutes |
| REV-C-005 *(Example)* | Contract balance roll-forward reviewed | Quarterly | [@group-controller] | Account reconciliation (`finance/account-reconciliation`) |

Re-assess the memo when the contract is modified, when the SSP study
changes by more than your policy threshold, when service-level credits
start to occur, when a new device or platform dependency makes the
bundle more integrated, or when the standard is amended.

## 15. Glossary and references

<!-- Guidance: Define terms in your own words, as used in this memo. Do not copy definitions from the standards. -->

### 15.1 Glossary

| Term | Meaning in this memo |
|---|---|
| Performance obligation (POB) | A promise to transfer a distinct good or service, or a series of them, that is accounted for separately |
| Stand-alone selling price (SSP) | The price at which the entity would sell the good or service separately to a similar customer |
| Transaction price | The consideration the entity expects to be entitled to for the contract, after the variable-consideration constraint |
| Series | Distinct periods of a service that are substantially the same and transfer in the same pattern, treated as one obligation |
| Contract asset | Revenue recognised before the right to consideration becomes unconditional |
| Contract liability | Consideration received or due before the related revenue is recognised |
| Material right | An option for additional goods or services at a discount that the customer would not otherwise receive |
| Remaining performance obligations | Allocated transaction price for obligations not yet satisfied at the reporting date |
| Principal | The party that controls the specified good or service before transfer and reports revenue gross |

### 15.2 References

| Reference | Version or date | Use |
|---|---|---|
| IFRS 15 Revenue from Contracts with Customers (IFRS Foundation) | Effective for periods from 2018-01-01, as amended; cited by paragraph number only | Five-step model |
| FASB ASC Topic 606 and Subtopic 340-40 | As amended; cited by paragraph number only | US GAAP comparison |
| IFRS 18 Presentation and Disclosure in Financial Statements | Effective 2027-01-01 | Presentation category |
| IAS 37 Provisions, Contingent Liabilities and Contingent Assets | Current | Assurance warranty |
| Technical Accounting Memo (`finance/technical-accounting-memo`) | This collection | Generic memo format |
| Accounting Policy Manual (`finance/accounting-policy-manual`) | This collection | Revenue policy |
| SaaS Metering and Billing Design (`architecture/saas-metering-billing-design`) | This collection | Billing and usage data |
| [Group SSP study] | [Version, date] | SSP evidence |

## Standard and licence note

Structure aligned with the five-step revenue model of IFRS 15 Revenue
from Contracts with Customers and FASB ASC Topic 606 and Subtopic
340-40. Standards are cited by name and paragraph number only; no text,
definitions or illustrative examples from the IFRS Foundation or FASB
are reproduced or paraphrased, and IFRS is a trademark of the IFRS
Foundation used nominatively. Obtain the current standards for the
normative requirements and check later amendments and their effective
dates. The worked example, Corvid Commerce Group, Larkspur Outfitters
and every figure are fictional and original. This template is original
text written for this collection and is not accounting advice.
Template licence: MIT.