Revenue Recognition Policy

{{company_name}}

{{company_address}}

Phone: {{phone}} | Email: {{email}} | Web: {{website}}

Revenue Recognition Policy

Revenue Recognition Policy

{{company_name}} {{company_address}} Phone: {{phone}} Email: {{email}} Website: {{website}}

1. Introduction and Purpose

This Revenue Recognition Policy establishes the principles and procedures for recognizing revenue at {{company_name}}. The purpose of this policy is to ensure that revenue is recognized in accordance with applicable accounting standards, specifically IFRS 15 (Revenue from Contracts with Customers) where appropriate, and truthfully reflects the company's financial performance. This policy applies to all revenue-generating activities of the company.

2. Scope

This policy applies to all revenue generated from contracts with customers, including but not limited to, sales of goods, services rendered, subscription revenues, and licensing agreements. It covers all departments and employees involved in sales, invoicing, and financial reporting.

3. Core Principle - Five-Step Model

Revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the company expects to be entitled to in exchange for those goods or services. This is achieved by applying the following five-step model:

3.1. **Identify the contract(s) with a customer:** A contract exists when it has commercial substance, the parties are committed, rights and payment terms are identifiable, and collectibility is probable.

3.2. **Identify the separate performance obligations in the contract:** A performance obligation is a promise to transfer a distinct good or service to the customer.

3.3. **Determine the transaction price:** The amount of consideration the company expects to be entitled to, excluding amounts collected on behalf of third parties.

3.4. **Allocate the transaction price to the separate performance obligations:** Based on their relative stand-alone selling prices.

3.5. **Recognize revenue when (or as) the entity satisfies a performance obligation:** Revenue is recognized over time if specific criteria are met, otherwise at a point in time.

4. Performance Obligations

A good or service is distinct if: (a) the customer can benefit from the good or service on its own or together with other readily available resources; and (b) the company's promise to transfer the good or service is separately identifiable from other promises in the contract. Examples of performance obligations include:

- Sale of manufactured goods.

- Provision of consulting services.

- Software licenses.

- Maintenance and support services.

5. Variable Consideration

If the amount of consideration is variable (e.g., discounts, rebates, penalties, performance bonuses), the company will estimate the amount of consideration it expects to be entitled to. The company will only include estimated amounts of variable consideration in the transaction price to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

6. Contract Modifications

A contract modification exists when the parties to a contract approve a change that either changes the scope or price (or both) of the contract, or creates new or enforceable rights and obligations. Contract modifications will be accounted for as a separate contract, termination of the existing contract and creation of a new contract, or as part of the existing contract, depending on the nature of the modification and whether distinct goods or services are added.

7. Contract Costs

**7.1. Costs to obtain a contract:** Incremental costs of obtaining a contract (e.g., sales commissions) are capitalized if the company expects to recover them. They are amortized on a systematic basis consistent with the transfer of the related goods or services to the customer.

**7.2. Costs to fulfil a contract:** Costs incurred to fulfil a contract are capitalized if they (a) generate or enhance resources of the entity, (b) can be identified as directly relating to a contract, and (c) are expected to be recovered. They are amortized on a systematic basis consistent with the transfer of the related goods or services to the customer.

8. Disclosures

The company will provide qualitative and quantitative information about its contracts with customers, including:

- Revenue recognized from contracts with customers, disaggregated by type of good or service, geographical region, market, or customer type.

- Contract balances, including contract assets and contract liabilities.

- Significant judgments and changes in judgments made in applying the revenue recognition guidance.

- Practical expedients used.

9. Responsibilities

The **Finance Department** is responsible for the implementation, monitoring, and compliance with this policy. All employees involved in sales, project management, and invoicing are responsible for adhering to the principles outlined herein. Training will be provided as necessary to ensure understanding and compliance.

10. Effective Date and Review

This policy is effective as of {{effective_date}} and will be reviewed annually, or more frequently if there are significant changes in accounting standards, business operations, or legal requirements. Any amendments to this policy must be approved by {{approving_authority}}.

Signature:

_____________________________

{{ signatory_name }}

{{ signatory_title }}

Date: {{ signature_date }}