Revenue Recognition Policy

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{{company_name}}

{{company_address}}

Phone: {{phone}}

Email: {{email}}

Website: {{website}}

1. Purpose and Scope

This Revenue Recognition Policy establishes the principles and procedures for recognizing revenue from contracts with customers. It applies to all revenue-generating activities of {{company_name}} and its subsidiaries.

The policy aims to ensure that revenue is recognized in compliance with applicable accounting standards, specifically IFRS 15 (Revenue from Contracts with Customers), and to provide a consistent framework for revenue reporting.

2. Core Principle

The core principle of this policy is that an entity shall recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

3. Five-Step Model for Revenue Recognition

Revenue recognition will follow a five-step model:

**Step 1: Identify the contract(s) with a customer.** A contract exists when all of the following criteria are met:

a. The parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to performing their respective obligations.

b. The entity can identify each party's rights regarding the goods or services to be transferred.

c. The entity can identify the payment terms for the goods or services to be transferred.

d. The contract has commercial substance (i.e., the risk, timing, or amount of the entity's future cash flows is expected to change as a result of the contract).

e. It is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

**Step 2: Identify the performance obligations in the contract.** A performance obligation is a promise to transfer a good or service (or a bundle of goods or services) that is distinct.

**Step 3: Determine the transaction price.** The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (e.g., sales taxes).

**Step 4: Allocate the transaction price to the performance obligations.** For a contract that has more than one performance obligation, an entity shall allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for satisfying each performance obligation.

**Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.** Revenue is recognized when control of the distinct good or service is transferred to the customer. This can be at a point in time or over time.

4. Variable Consideration

If the consideration promised in a contract includes a variable amount, {{company_name}} will estimate the amount of consideration to which it expects to be entitled. Variable consideration may be constrained if it is probable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.

5. Contract Costs

Costs incurred to obtain a contract with a customer (e.g., sales commissions) will be recognized as an asset if the entity expects to recover those costs. These costs will be amortized on a systematic basis consistent with the transfer of the related goods or services to the customer.

Costs incurred to fulfill a contract will be capitalized if they relate directly to a contract, generate or enhance resources of the entity that will be used in satisfying performance obligations in the future, and are expected to be recovered.

6. Payment Terms and Credit Risk

Revenue will be recognized independently of payment terms. The existence of credit risk (i.e., whether a portion of the consideration may not be collected) does not affect the determination of the transaction price but rather impacts the assessment of collectibility in Step 1.

Payment terms are typically {{payment_terms}} days from the invoice date. Any exceptions must be approved by {{approving_authority}}.

7. Disclosure Requirements

{{company_name}} will disclose qualitative and quantitative information about its contracts with customers, including:

a. Revenue recognized from contracts with customers, disaggregated into appropriate categories.

b. Information about contract balances, such as contract assets, contract liabilities, and accounts receivable.

c. Information about significant judgments made in applying the revenue recognition guidance.

d. Information about assets recognized from the costs to obtain or fulfill a contract.

8. Responsibilities

The Finance Department is responsible for the implementation and adherence to this policy. All relevant staff are required to familiarize themselves with this policy and apply it consistently.

Any questions or concerns regarding revenue recognition should be directed to the {{finance_manager_name}}, Finance Manager, at {{finance_manager_email}}.

9. Policy Review

This policy will be reviewed annually, or more frequently if necessary, to ensure its continued relevance and compliance with changes in accounting standards and business operations. The next review date is {{review_date}}.

Signature Block

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{{authorized_signatory_name}}

{{authorized_signatory_title}}

{{date}}