What are the five steps of the revenue recognition model under IFRS 15?

The five steps of the revenue recognition model under IFRS 15 are centered on providing a clear framework for recognizing revenue from contracts with customers. The correct option outlines this process effectively:

1. Identify the contract with the customer: This refers to the necessity of having a legally enforceable agreement that outlines the parties’ rights and obligations regarding the transfer of goods or services.

2. Identify the performance obligations in the contract: This step involves identifying distinct goods or services that are promised in the contract. A performance obligation is satisfied when control of the promised good or service is transferred to the customer.

3. Determine the transaction price: This involves calculating the amount of consideration a company expects to receive in exchange for transferring goods or services. The transaction price may include fixed amounts, variable amounts, and any adjustments for discounts or concessions.

4. Allocate the transaction price to the performance obligations: If the contract includes multiple performance obligations, the transaction price must be allocated to each obligation based on their relative standalone selling prices.

5. Recognize revenue when (or as) the entity satisfies a performance obligation: This final step involves recognizing revenue when control of the promised good or service is transferred to the customer, either at a