Final answer:
IFRS 15 sets criteria for when a performance obligation is satisfied. It takes into account the transfer of control and the ability to direct the use of goods or services.
Step-by-step explanation:
IFRS 15 sets out criteria for when a performance obligation is satisfied. It provides guidance on how to determine when revenue from the sale of goods or services is recognized. According to IFRS 15, a performance obligation is satisfied when control of the goods or services is transferred to the customer.
For example, if a company sells a product to a customer with the understanding that the customer will pay in 30 days, the performance obligation would be satisfied when the product is delivered to the customer, even though payment will not be received until later.
The criteria for determining when a performance obligation is satisfied include:
- Transfer of control to the customer
- The customer has the ability to direct the use of the goods or services
- The seller has the right to payment
- The buyer has assumed the risks and rewards of ownership