Revenue accounting: IFRS® Accounting Standards vs US GAAP

From the IFRS Institute – September 15, 2026

Authors: Valerie Boissou; Paulina Kumah

As the ultimate topline KPI, revenue is essential for accurate peer benchmarking. Although IFRS 15¹and Topic 606²remain substantially converged, differences continue to exist – including new differences arising from recent standard-setting activity.

From divergent rules on licenses and business combinations to equity-based instruments granted to customers, differences in the details between IFRS 15 and Topic 606 have emerged. So, is revenue accounting still truly converged? We break down ten of the top differences within revenue recognition today between IFRS^® Accounting Standards and US GAAP.

The core principle of IFRS 15 is that a company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. A company recognizes revenue in accordance with that principle by applying a five-step model as follows.

Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the company satisfies a performance obligation

In many cases, companies apply the respective cost guidance under other standards (e.g. the standard on inventory), but IFRS 15 prescribes requirements specific to costs of obtaining and costs of fulfilling a customer contract, including amortization and impairment of contract costs.

IFRS 15 also includes disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue, certain costs and cash flows arising from a company’s contracts with customers.

While both IFRS 15 and Topic 606 remain substantially converged, certain differences exist that can affect comparability. We summarize what we see as the top 10 differences in revenue accounting and disclosures under IFRS Accounting Standards and US GAAP.

1. Identifying a contract – collectibility threshold

In identifying a contract with a customer in Step 1, a company needs to determine if specific criteria are met, including whether it is probable that it will collect the consideration to which it expects to be entitled. Under IFRS 15, probable means ‘more likely than not’ (greater than 50% probability).

US GAAP Comparison

US GAAP also refers to ‘probable’ for a similar assessment, but ‘probable’ means ‘likely’ (generally understood in practice as 75-80% or higher) – i.e. a higher threshold than under IFRS Accounting Standards. Additionally, under Topic 606, the company evaluates whether it is probable that it will collect ‘substantially all’ of the consideration to which it is entitled.

For dual reporters, this is not merely a terminology difference. This can affect whether a contract is accounted for under the revenue model at inception or whether consideration received is initially recognized as a liability until the collectibility threshold criteria are met. A customer credit assessment that satisfies the IFRS Accounting Standards threshold may not always satisfy the US GAAP threshold, particularly when there are significant collectability concerns – such as customers with weaker credit profiles or arrangements with extended payment terms.

2. Scope differences

IFRS 15 includes scope exceptions that are accounted for under other standards. For example, insurance contracts in the scope of IFRS 17³are excluded from the revenue standard, regardless of the type of company that issues them. Further, there is no specific guidance in IFRS Accounting Standards for fees and loyalty programs related to credit cards; instead, the general scoping and accounting considerations of IFRS 15 apply.

US GAAP Comparison

While the Topic 606 and IFRS 15 scope requirements are mostly aligned, differences can arise. The standards governing scoped-out transactions are not always the same under US GAAP and IFRS Accounting Standards. For example, Topic 606 excludes contracts issued by insurance companies that are in the scope of insurance guidance in Topic 944. Unlike IFRS Accounting Standards, US GAAP has specific accounting guidance for credit card fees that entitle the cardholder to use the credit card. That guidance does not permit separate accounting for credit card fees, and therefore goods and services covered by credit card fees are scoped out of Topic 606. Credit card loyalty programs may also be scoped out of Topic 606, depending on facts and circumstances.

These scope differences can affect whether the revenue model applies to a transaction and, if not, which accounting model applies instead. Companies should therefore not assume that a transaction in the scope of IFRS 15 will also be in the scope of Topic 606, or vice versa. This analysis is particularly important for financial services, insurance and insurance-related arrangements.

3. Shipping and handling activities

Under IFRS 15, shipping and handling activities that occur after the customer has obtained control of the related goods may represent a separate performance obligation depending on whether they are distinct from the related goods. If shipping and handling services represent a distinct performance obligation and the company acts as a principal, then a portion of the revenue is allocated to them and recognized when the shipping and handling services are provided.

US GAAP Comparison

Topic 606 provides a policy election to treat shipping and handling activities undertaken after the customer has obtained control of the related goods as a fulfillment activity, rather than a separate performance obligation.

If this election is made, all revenue is recognized when control of the related goods transfers to the customer, such that revenue may be recognized earlier under US GAAP as compared to IFRS Accounting Standards.

4. Presentation of sales and similar taxes

Under IFRS 15, a company assesses whether it is the principal for sales taxes or is collecting them on behalf of a tax authority. That assessment is based on the analysis of the local regulations and requires significant judgement. If a company determines it is primarily obligated for the payment of a sales or similar tax, it includes them in the transaction price. Conversely, if a company determines it acts as a collecting agent for tax authorities, it excludes such taxes from the transaction price.

US GAAP Comparison

Topic 606 provides a policy election to exclude from the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with the specific revenue-producing transaction and collected by the company from customers.

This election is relevant to sales, use, value-added and some excise taxes. It can simplify the analysis and may reduce revenue compared with IFRS Accounting Standards if a company concludes it is the principal for certain taxes and includes them in revenue under IFRS Accounting Standards.

5. Noncash consideration

IFRS 15 requires noncash consideration to be measured at fair value but does not specify the measurement date. In our view, companies should apply judgement, based on the relevant facts and circumstances, to determine whether to measure noncash consideration with reference to the date on which the contract is entered into, the date the noncash consideration is received or the date the performance obligation is satisfied.

IFRS 15 also does not specify how to account for noncash consideration that is variable both because of its form (e.g. changes in share price) and for other reasons.

US GAAP Comparison

Topic 606 requires noncash consideration to be measured at fair value at contract inception. It also provides specific guidance for noncash consideration whose fair value varies both because of the form of the consideration and for other reasons. The variable consideration constraint applies only to variability arising for reasons other than the form of the consideration. These differences from IFRS 15 can affect both the amount of the transaction price and the timing of revenue recognized.

6. Equity-based instruments granted to customers

IFRS 15 does not provide specific guidance on equity-based instruments granted to customers in conjunction with selling goods or services. Depending on the facts and circumstances, such arrangements may represent variable consideration and/or consideration payable to a customer and therefore a reduction in the transaction price. Because equity-based instruments are noncash consideration, a company first considers the noncash consideration guidance in IFRS 15 in arriving at the transaction price and then determines whether to recognize that reduction in revenue. Once a company has recognized an asset arising from the noncash consideration, it accounts for it by applying the relevant accounting standard, e.g. IFRS 9 when granting an equity instrument in the scope of that standard.

US GAAP Comparison

Topic 606 specifies that equity-based instruments granted to a customer in conjunction with selling goods or services are consideration payable to a customer. Those instruments are measured and classified under the share-based payment guidance in Topic 718. When the consideration is accounted for as a reduction of revenue, the grant-date fair value is ultimately recorded as a reduction of revenue. Subsequent remeasurement of a liability-classified instrument is recorded elsewhere in the company’s income statement.

These differences with IFRS 15 can affect both the amount of the transaction price and the timing of revenue recognized.

7. Licenses of intellectual property

Under IFRS 15, revenue from a license of intellectual property (IP) is recognized over time only when specific criteria are met; otherwise, revenue is recognized at a point in time.

Further, IFRS 15 does not provide guidance on distinguishing attributes of a license from additional licenses; therefore, judgment is required to determine when a restriction creates multiple licenses or when it is an attribute of the license.

If the renewal or extension of an existing license is agreed upon before the start of the renewal period, in our view, a company should choose an accounting policy, to be applied consistently, to recognize revenue for the renewal when:

the renewal is agreed upon – on the basis that the renewal is regarded as a modification of an existing contract in which the license has already been delivered; or
the renewal period starts – on the basis that this is the date from which the customer can use and benefit from the renewal.

US GAAP Comparison

Topic 606 requires companies to classify the underlying IP as functional (conveying a right to use) or symbolic (conveying a right to access) to determine whether license revenue is recognized at a point in time or over time. Although outcomes may often be similar to those under IFRS 15, the analysis is not identical.

Topic 606 specifies that additional licenses need to convey additional rights to the customer. Attributes of a promised license (e.g. restrictions on time, use or geography) do not create an obligation for the company to transfer additional rights to use or access its IP.

Topic 606 also specifies that revenue from a renewal or extension of a license of IP may not be recognized before the beginning of the renewal period.

8. Revenue contract assets and liabilities in a business combination

In a business combination under IFRS Accounting Standards⁴ , contract assets acquired and contract liabilities assumed are measured at fair value, including those arising from revenue contracts with customers. As a result, the measurement of the contract assets and liabilities may differ from the amount that would have been recognized by the acquiree under IFRS 15 immediately before the acquisition, thereby affecting revenue recognized post-acquisition. For example, when fair valued, acquired deferred revenue is typically written down to an amount representing the cost to fulfill plus a reasonable profit margin.

US GAAP Comparison

US GAAP provides an exception to the general business combination fair value measurement model for revenue contracts with customers⁵. Under this exception, an acquirer measures related contract assets and contract liabilities by applying Topic 606 as if it had originated the contract itself, rather than measuring them at fair value. This exception can significantly affect goodwill recognized in the acquisition and post-acquisition revenue trends compared with IFRS Accounting Standards.

9. Revenue disclosures

Disclosure requirements in IFRS 15 equally apply to all companies reporting under IFRS Accounting Standards. Amongst other required disclosures, companies provide the transaction price allocated to remaining performance obligations, subject to certain practical expedients – including when the contract term is one year or less or when the company has a right to invoice for an amount that corresponds to the value transferred to the customer.

For interim reporting, IFRS Accounting Standards require only information about disaggregated revenue and its relationship with segment revenue. Other interim disclosures are typically not required.

US GAAP Comparison

Topic 606 permits nonpublic entities to provide more simplified disclosures than are required from public business entities.

Topic 606 also includes additional optional exemptions that may result in certain amounts being omitted from the disclosure of remaining performance obligations. For example, certain forms of variable consideration, such as sales- or usage-based royalties from licenses of IP, may be excluded.

Further, Topic 606 requires more extensive interim disclosures for public business entities. In addition to information about disaggregated revenue, there are requirements to disclose information on contract balances and performance obligations similar to the annual disclosures.

10. Differences beyond the topline

IFRS Accounting Standards and US GAAP further diverge with respect to certain aspects of accounting for customer contract costs and loss-making customer contracts. While these differences do not affect the revenue topline, they may affect gross margin and other profitability metrics.

IFRS 15 provides guidance on costs incurred to obtain a contract and costs incurred to fulfill a contract. If these costs are not in the scope of another accounting standard and meet specified criteria in IFRS 15, then they are recognized as an asset that is tested for impairment. A company recognizes an impairment loss when the carrying amount of such assets exceeds the remaining amount expected to be recovered. If the conditions that caused the impairment subsequently improve, the impairment loss is reversed. The reversal is limited to what the carrying amount would have been, net of amortization, if no impairment had been recognized.

US GAAP Comparison

Like IFRS 15, US GAAP has guidance in Topic 340⁶that specifically applies to costs to obtain and fulfill a customer contract that meets certain criteria, unless those costs are in the scope of other guidance (e.g. the inventory standard). However, US GAAP retained legacy cost guidance after the adoption of Topic 606 — e.g. guidance related to pre-production costs and hook-up costs for cable companies, which may create differences in accounting for similar costs under IFRS 15. Under US GAAP, contract cost assets are also subject to an impairment assessment. However, an impairment loss is not reversed, whereas IFRS 15 permits reversals when the impairment indicators no longer exist.

Further, under IFRS Accounting Standards (IAS 37), a provision for an onerous customer contract is recognized when the unavoidable costs of fulfilling the contract exceed the expected economic benefits. Unavoidable costs are measured based on the lesser of the cost to fulfill the contract and the cost to exit it. Fulfillment costs include both incremental costs and allocations of directly related costs (e.g. depreciation).

US GAAP Comparison

Under US GAAP, there is no concept of onerous contracts and therefore unavoidable costs may be accounted for under specific guidance, depending on the type of contract involved. These requirements differ from and are narrower than IFRS Accounting Standards.

Although IFRS 15 and Topic 606 remain substantially converged, important differences continue to affect the timing, measurement and presentation of revenue and related costs. Companies reporting under both IFRS Accounting Standards and US GAAP should identify these differences early, document the judgments applied under each framework and assess their effect on key revenue metrics and disclosures.