The IFRS 15 Mistake That’s Hiding in Plain Sight (And How to Spot It Before Your Auditor Does)
A software company just restated three years of revenue. The damage? $8 million. The cause? They thought bundled services were one thing when IFRS 15 said they were actually five different things.
The Bundle Trap
When IFRS 15 talks about “performance obligations,” most accountants think it’s obvious what to separate. But here’s where it gets tricky: Just because you sell things together doesn’t mean you account for them together.
The golden rule? If a customer can benefit from something on its own OR with other readily available resources, it’s probably a separate performance obligation.
Example that trips everyone up: A software company sells:
- Software license
- Installation service
- One year of updates
- Training sessions
- Technical support
Many accountants see one contract and record one sale. But IFRS 15 might see five different promises that need their own accounting.
The Real-World Test
Ask yourself: Could the customer use the software without your installation? Could they hire someone else to train their staff? If yes, you’ve got separate performance obligations.
One tech company learned this the hard way. They bundled everything at $100,000 and recognized it all upfront. The correct treatment?
- Software license: $60,000 (recognize immediately)
- Installation: $10,000 (recognize when complete)
- Updates: $15,000 (recognize over 12 months)
- Training: $5,000 (recognize when delivered)
- Support: $10,000 (recognize over 12 months)
Why This Matters Now
With subscription models everywhere, this issue is exploding. SaaS companies, consulting firms, even traditional manufacturers with service contracts—everyone’s at risk.
Your Takeaway as an Accountant
Stop looking at what you’re selling. Start looking at what your customer is buying. List every promise in your contracts, then test each one: “Could the customer use this by itself?” Document your logic. Your future self (and your auditor) will thank you.
The best accountants don’t just apply rules—they think like customers.
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