Revenue Recognition: Spanish GAAP vs. IFRS 15 | Maraz

Revenue Recognition: a matter of contractual architecture

Revenue recognition has ceased to be a matter of general accounting policy and has become a question of contractual design, legal evidence and operational data. The approval of the ICAC Resolution of 10 February 2021 (the “RICAC on revenue”), together with the reform of the Spanish General Accounting Plan (PGC) enacted through Royal Decree 1/2021 and aligned with EU-IFRS 15, replaced the historical model based on the transfer of risks and rewards with the economic principle of the transfer of control. That shift has reshaped how turnover accrues, and it is a central piece of financial advisory for mid-market companies.

The core principle, identical in both frameworks, is that revenue is recognised neither when it is invoiced nor when it is collected, but when the company transfers control of the promised good or service, for the amount of consideration to which it expects to be entitled. For a corporate finance firm this is no technicality: the criterion applied has a direct bearing on the quality of EBITDA (Quality of Earnings), on working capital, on covenant compliance and on the normalisation of valuation metrics. Inadequate recognition does not merely distort the financial statements: it creates information asymmetries that alter a company’s price in a transaction.

In brief:

• Same principle and same five-step model under PGC and IFRS 15: revenue is recognised upon transfer of control.
• The decision that most affects the timing of the result is over time versus point in time, resolved through three criteria on control, alternative use and an enforceable right to payment.
• Material practical differences remain — chiefly in contract acquisition costs and balance-sheet presentation — which in due diligence require reconciling local GAAP with IFRS.
• The greatest casuistry lies in construction, real estate development and software.

1. Regulatory framework and PGC vs. IFRS 15 comparison

The Spanish framework: NRV 14 and the 2021 RICAC

Revenue recording starts from the accrual principle in the PGC Conceptual Framework (Royal Decree 1514/2007). On that basis, NRV 14 (“Revenue from sales and the rendering of services”) was amended by Royal Decree 1/2021, and its implementing rules are the RICAC on revenue, mandatory for all companies applying the PGC, whatever their legal form, for financial years beginning on or after 1 January 2021. It applies on a subsidiary basis to entities following the PGC for SMEs.

A frequent point of confusion is worth clarifying: the core rule is the Resolution of 10 February 2021 (BOE-A-2021-2155), not 10 March. The ICAC itself notes that, since many of the refinements of IFRS 15 were already present in its prior doctrine (BOICAC rulings), the entry into force should not entail a significant change for most companies; the real change lies in the disclosures to be made in the notes to the financial statements.

The international framework: IFRS 15 and the five-step model

IFRS 15 (“Revenue from Contracts with Customers”) is mandatory for financial years beginning on or after 1 January 2018 and replaced IAS 18, IAS 11 and several interpretations (IFRIC 13, 15, 18 and SIC 31). Its five-step model, now common to both frameworks, is:

1. Identify the contract with the customer: an agreement with enforceable rights, commercial substance, probability of collection and approval by the parties. Contracts negotiated as a package with a single commercial objective must be combined.
2. Identify the performance obligations: each “distinct” good or service — one from which the customer can benefit on its own and which is separately identifiable within the contract.
3. Determine the transaction price: the expected consideration, excluding amounts collected on behalf of third parties, and accounting for variable consideration, the financing component and non-cash consideration.
4. Allocate the price to each obligation in proportion to its standalone selling price, estimating it where it is not directly observable.
5. Recognise revenue when — or as — each obligation is satisfied through the transfer of control, whether over time or at a point in time.

The key decision: “over time” versus “point in time”

Revenue is recognised over time if at least one of these three criteria is met (IFRS 15 paragraph 35 / RICAC articles 9-11):

• (a) The customer simultaneously receives and consumes the benefits as the company performs (recurring services: utilities, cleaning, security).
• (b) The company creates or enhances an asset the customer controls as it is created or enhanced (work on the customer’s land).
• (c) The company creates an asset with no alternative use to it and has an enforceable right to payment for performance completed to date (costs incurred plus a reasonable margin).

If none is met, revenue is recognised at a point in time (paragraph 38 / RICAC article 10), when the customer obtains control.

The decision tree is as follows:

Does the customer simultaneously receive and consume the benefits?
├─ Yes → OVER TIME
└─ No
└─ Does the customer control the asset as it is created/enhanced?
├─ Yes → OVER TIME
└─ No
└─ Does the asset have no alternative use AND is there an enforceable right to payment for work done (cost + margin)?
├─ Yes → OVER TIME
└─ No → AT A POINT IN TIME

In real estate development, construction, EPC, consulting and bespoke software, the third step — alternative use and right to payment — is the real friction point. Measuring progress, where over-time recognition applies, allows both output methods (units, certifications, milestones) and input methods (cost-to-cost, hours), with no preference between them, provided they faithfully depict the transfer of control.

PGC vs. IFRS 15 comparison table

Technical note: contract acquisition costs (where PGC and IFRS genuinely diverge)

This is the point where the two frameworks do not coincide, and where mistakes are easy. Under IFRS 15, incremental costs of obtaining a contract (e.g. sales commissions) are capitalised if they are expected to be recovered, with a practical expedient to expense them where the amortisation period is ≤ 1 year.

Under PGC/RICAC, the general rule is to expense them systematically and consistently with the transfer (with accruals where appropriate), unless their nature takes them to inventory or intangible assets. Accordingly, the claim that RICAC article 28 “requires capitalising” customer-acquisition commissions as a deferred intangible must be qualified: that is not the general PGC rule. In due diligence, this difference creates timing mismatches between Spanish local GAAP and IFRS comparables that are worth isolating.

2. Complex cross-cutting treatments

Contract modifications, variations and claims

Addenda, work variations and claims are rarely a minor footnote: they alter the transaction price, the measure of progress and, therefore, the margin already recognised. Both frameworks converge on three treatments:

• Separate contract: where they add distinct goods or services at a price that reflects their standalone selling prices.
• Prospective treatment (termination + new contract): where the remaining goods or services are distinct but the modification is not separate.
• Cumulative catch-up: where the modification affects a partially satisfied obligation that is not distinct, the cumulative revenue is adjusted immediately.

Where the parties have approved a change in scope but are still negotiating the price, the standard requires it to be estimated as variable consideration. Conversely, late-delivery penalties reduce the transaction price from the moment the delay is expected, lowering the revenue recognised in each certification.

Variable consideration and the constraint

Discounts, retrospective volume rebates, returns, incentives, bonuses, penalties and claims are variable consideration. They are estimated using the expected value or the most likely amount, but the constraint applies: only the amount that is highly probable not to reverse significantly when the uncertainty is resolved may be recognised. In practice, a legally disputed claim or a bonus lacking objective evidence should not be recognised in full as revenue.

The accrual of a volume rebate is independent of the documentary flow

A frequent mistake is to treat a retrospective volume rebate (rappel) as if it arose with the credit note, the customer’s confirmation or the annual settlement. It does not: the rebate is variable consideration and accrues as the sales that generate it are made, not when the document is issued or acknowledged. From the first delivery of the year the seller estimates the expected rebate and recognises revenue net (not gross, pending a year-end true-up); the buyer, symmetrically, accrues the higher discount against each purchase.

The corrective invoice or credit note is a tax/VAT requirement to modify the taxable base, but it is not a condition for accounting recognition: economic substance (the sales giving rise to the discount have occurred) prevails over the administrative document. Waiting for the document breaks the cut-off — inflating sales in one year and unloading the rebate in the next — and is a typical Quality of Earnings red flag in due diligence. The accrual is, however, subject to the constraint: only the rebate that is highly probable not to reverse is brought forward.

Example (in the seller). A 3% rebate if the customer buys more than €100,000 in the year, where reaching the threshold is estimated to be highly probable. From the first sale, revenue is recognised at 97% and the 3% is set up as a rebate liability; the annual credit note merely settles a liability already accrued. If mid-year the threshold ceases to be probable, the estimate is adjusted (cumulative catch-up), without waiting for the paperwork.

FOR EACH SALE (estimated rebate highly probable)
Dr  Trade receivables / Cash ........... 100
Cr  Revenue ............................. 97
Cr  Rebate liability (to accrue) ......... 3

ANNUAL SETTLEMENT (the credit note only settles the liability)
Dr  Rebate liability ................... [balance]
Cr  Trade receivables / Cash ......... [balance]

Significant financing component

Where the payment schedule provides one of the parties with a significant financing benefit (deferred or advance payments), that component must be separated and revenue recognised at the cash-equivalent price, with the difference taken to finance income or expense. A practical expedient applies where the period between transfer and payment is ≤ 1 year, but it does not automatically render “non-significant” a long deferral dressed up as a contractual milestone. ESMA has corrected issuers that measured financing against final “physical delivery” instead of against the accounting pattern of transfer recognised over time.

Warranties: “assurance” versus “service”

RICAC article 25 distinguishes the assurance-type warranty (which assures that the product meets specifications): treated as a provision under NRV 15 and not a separate obligation. And the service-type warranty (extended maintenance, priority replacement): a separate performance obligation, allocated part of the price and recognised on a straight-line basis over its term.

Principal versus agent

This is determined by who controls the specified good or service before it is transferred to the customer. The principal recognises gross revenue; the agent, only the net commission or margin. ESMA and the IFRS IC have reiterated that the central test is control, not credit risk or the mere fact of invoicing the customer: a reseller ordering in its own name and bearing risk may still be an agent if, in substance, it does not control the good before delivery.

Contract acquisition and fulfilment costs

As noted, this is the largest practical divergence. Under IFRS 15, the incremental costs of obtaining a contract (recoverable) and fulfilment costs that meet the criteria and fall outside other standards are capitalised as a specific asset. Under PGC/RICAC, acquisition costs are expensed systematically (with accruals) unless their nature takes them to inventory or intangible assets, and fulfilment costs are classified as inventory or intangible assets according to their nature and recovery horizon.

3. Sector-by-sector casuistry

Industrial and Manufacturing

In the sale of goods the critical point is when control transfers (Incoterms — FOB, CIF — are the contractual evidence of timing and place). The sale of standard goods is usually point in time, based on indicators such as a present right to payment, title, physical possession, acceptance and the transfer of risks. The criterion sets turnover at the top of the income statement. Relevant casuistry:

• Sales with a right of return (art. 24): revenue is recognised only for what is not expected to be returned; a refund liability and a right-of-return asset (classified as inventory) are recorded.
• Retrospective volume rebates: from the first delivery the total volume must be estimated and sales recorded at the expected net unit price, not at the gross invoiced price.
• Warranties: assurance-type (provision) vs. service-type (separate obligation). See 2.4.
• Repurchase agreements (art. 30): they may not be a sale but a lease or a financing arrangement; when comparing the repurchase price with the sale price, the time value of money must be considered.
• Bill-and-hold (art. 32): revenue is recognised only if strict conditions are met evidencing that the customer already controls the good despite not having physically received it.
• Highly customised manufacturing: a bespoke machine or line with no alternative use and an enforceable right to payment for cumulative performance may be recognised over time. Industrial sales are not always point in time.

Construction, Engineering and long-term projects

This is where the timing rules have the greatest impact. Under IFRS 15, the decisive factor is no longer whether the item is built to order, but the analysis in paragraph 35. In work on the customer’s land, the customer usually controls the work in progress (criterion b), so over-time recognition applies. The most common method is the input method (costs incurred / total estimated costs), but the cost base must be scrubbed: inefficiencies, cost overruns from design errors, unproductive labour and uninstalled materials on site (which go to inventory) do not count towards the measure of progress.

Practical aspects of the sector in Spain

• Work certifications: paid “on account” and measuring the work performed; they are a good indicator of progress, but a certification is not necessarily equivalent to accounting revenue.
• Retention money: the Building Regulation Act (LOE, art. 19) provides for a 5% retention on the cost of housing works as an alternative to insurance; in public works the 5% derives from art. 107 of Law 9/2017. In private works the actual range runs from 3% to 7%. For accounting purposes, the retention still belongs to the contractor.
• Onerous contracts: where the costs of fulfilling the contract exceed the expected benefits, NRV 15 requires a provision (accounts 4994/6954); the expected loss is recognised immediately.
• Significant third-party materials: when the input method is used, no margin is recognised on significant materials acquired but not yet installed; their revenue is recognised only at cost when control passes.

Real Estate Development

The general criterion for the sale of off-plan residential housing in Spain is to recognise revenue at a point in time, typically on the deed and handover of keys, not by stage of completion. The reason lies in the paragraph-35 test: the buyer does not control the home under construction (criterion b fails) and, above all, the developer usually has no enforceable right to be paid for work done plus a margin if the contract is terminated — it retains only advances or a penalty (the second condition of criterion c fails).

Accordingly, advance collections are a contract liability (customer advances), not revenue, until handover. This outcome is consistent with the IFRS IC Agenda Decision of March 2018 on a residential real estate contract. It must be stressed that the outcome depends on the contract and the legal framework: if the contract granted an enforceable right to be paid for work done plus a margin and the asset had no alternative use, over-time recognition would apply. In the IFRS IC’s sister decision (a contract that includes the transfer of land), the Committee did conclude that the transfer of the land may be a separate obligation recognised point in time, while the construction of the building is analysed separately.

If the financing component of the advances exceeds twelve months and provides significant financing, a periodic finance expense must be recognised that increases the advance up to the date of the deed.

Software, Technology and SaaS

The analysis begins by distinguishing whether the customer receives a licence or a service, and whether the licence is distinct from maintenance, hosting or customisation:

• Right-to-use licence: the customer exploits the software as it exists (on-premise). Revenue at a point in time when made available.
• Right-to-access licence / SaaS: the customer accesses IP that evolves through updates and improvements by the provider. Revenue over time, deferred on a straight-line basis over the subscription.
• Hybrid development and integration contracts: if the implementation is standardised and a third party could configure the software, the licence and services are separate obligations. If the services structurally alter the code or are indispensable for operation, they merge into a single obligation recognised by stage of completion.
• Sales- or usage-based royalties: revenue is recognised when the subsequent sale/use occurs.
• Principal / agent in technology resale: the key is whether the reseller controls the licence before transferring it (gross) or merely arranges supply (net).

Consulting and professional services

The general pattern is over-time recognition, because the customer simultaneously consumes the benefit of the service. In Time & Materials the “right to invoice” practical expedient may apply where the rate corresponds to the value of work performed. In fixed-price contracts, progress is measured (hours or costs against budget), with periodic review to detect onerous contracts. The billing milestone is a good measure of progress only if it faithfully represents the transfer of control.

Success fees in M&A

The most relevant case for a corporate finance firm. The fixed retainer accrues on a straight-line basis over the mandate. The success fee is contingent variable consideration subject to the constraint: given the uncertainty over closing — regulation, buyer financing, last-minute negotiations — it should not be included in the transaction price in advance, and is recognised when the transaction is highly probable / legally executed, avoiding the risk of reversal.

Energy, EPC and Concessions

• Recurring supply of energy or services: the customer simultaneously consumes the output; revenue over time as it is supplied.
• EPC / turnkey contracts: same analysis as construction (control of the work in progress, alternative use, right to payment).
• Public-infrastructure concessions: the consideration for the construction phase may be a financial asset, an intangible or a mixed model; construction and operation revenues are split by their relative fair value. The ICAC has applied contract-modification logic to concession rebalancing.

Other Industries

In telecommunications, activation fees, subsidised handsets and monthly service require separating obligations and allocating price by their standalone value. In retail and distribution, returns, rebates and loyalty programmes dominate, with revenue recognised net of the portion not expected to be retained. In marketplaces and platforms, the focus is principal/agent. In media, franchising and branding, the use/access distinction is decisive. These tend to be mixed sectors, not monolithic ones.

Sector summary matrix

4. Numerical examples and illustrative entries

The examples are illustrative, are stated net of VAT and use account terminology close to the PGC. The exact account names may be adapted to each entity’s accounting policy.

Construction: stage of completion with a variation and a claim

Assumption. Fixed price 10,000; total estimated cost 8,000. At the end of Year 1, costs incurred amount to 3,200.

• Stage of completion, Year 1: 3,200 / 8,000 = 40%.
• Cumulative revenue, Year 1: 10,000 × 40% = 4,000. Margin: 4,000 − 3,200 = 800.

Year 2. A non-distinct variation of +1,000 is approved and a claim of 300, of which only 100 is highly probable not to reverse → new price 11,100. Revised total cost 8,800; cumulative costs 5,280.

• New stage of completion: 5,280 / 8,800 = 60%.
• Revised cumulative revenue: 11,100 × 60% = 6,660. Year 2 revenue: 6,660 − 4,000 = 2,660.

YEAR 1
Dr  Trade receivables / Contract asset ... 4,000
Cr  Revenue from work performed .......... 4,000
Dr  Cost of sales / works .............. 3,200
Cr  Inventory / work in progress ........ 3,200

YEAR 2 (progress + variation + constrained claim)
Dr  Trade receivables / Contract asset ... 2,660
Cr  Revenue from work performed .......... 2,660
Dr  Cost of sales / works .............. 2,080
Cr  Inventory / work in progress ........ 2,080

Real estate development: off-plan sale recognised on handover

Assumption. Price 300,000; customer advance 60,000 during construction; total cost 210,000. The contract gives the developer no enforceable right to be paid for cumulative performance on termination → recognition at a point in time.

ON RECEIPT OF THE ADVANCE
Dr  Cash ............................. 60,000
Cr  Customer advances / Contract liability . 60,000

ON HANDOVER OF THE PROPERTY
Dr  Trade receivables ................ 240,000
Dr  Customer advances ............... 60,000
Cr  Property sales ...................... 300,000
Dr  Cost of sales ................... 210,000
Cr  Development inventory .............. 210,000

Software: distinct licence, maintenance and SaaS

Assumption A (on-premise + maintenance). Package price 100. SSP: licence 90, maintenance 30 (total 120). Allocation: licence 100 × 90/120 = 75; maintenance 25. The licence is recognised on delivery; maintenance, 25/12 = 2.083 per month.

DELIVERY OF LICENCE AND INVOICING OF THE PACKAGE
Dr  Trade receivables ...................... 100
Cr  Licence revenue ......................... 75
Cr  Maintenance contract liability ......... 25
AT THE CLOSE OF EACH MAINTENANCE MONTH
Dr  Maintenance contract liability ...... 2.083
Cr  Maintenance revenue ................. 2.083

Assumption B (annual SaaS 120 collected upfront). Continuous service: 10 per month.

Dr  Cash .............. 120   |   Dr  SaaS liability ... 10
Cr  SaaS liability . 120   |       Cr  SaaS revenue ... 10

Assumption C (reseller with no prior control). Fee of 15 on a licence of 100 → net revenue 15, not 115 gross.

Dr  Trade receivables ................ 115
Cr  Payables / manufacturer ........... 100
Cr  Commission revenue ................. 15

Consulting: T&M and fixed price

A (Time & Materials). 320 hours × €100/h with a right to invoice → revenue 32,000 (“right to invoice” practical expedient).

B (fixed price). 200,000; total estimated cost 160,000; costs at period-end 64,000 → 40% completion → cumulative revenue 80,000; margin 16,000.

Dr  Trade receivables / Contract asset ... 80,000
Cr  Service revenue .................... 80,000
Dr  Cost of sales / project ............. 64,000
Cr  Inventory / work in progress ...... 64,000

Telecom: handset + monthly service

Assumption. Package 840. SSP handset 400, service 600 (total 1,000). Allocation: handset 336; service 504. Handset revenue upfront (336) is brought forward relative to cash; service 504/24 = 21 per month.

Dr  Trade receivables / right to payment .. 840
Cr  Handset sales ....................... 336
Cr  Service contract liability ......... 504
(monthly)  Dr Service contract liability 21 / Cr Revenue 21

5. Implications for M&A, due diligence and valuation

For a corporate finance firm, revenue recognition is at the heart of the Quality of Earnings analysis, which is usually the largest workstream in a financial due diligence. The timing of recognition has a direct bearing on EBITDA normalisation: bringing revenue forward inflates historical EBITDA and distorts the base to which the multiple is applied, as well as separating accrued profit from free cash flow.

Quality of EBITDA and multiples

In multiples-based valuation, analysts normalise turnover by stripping out revenue recognised early without a transfer of control. A typical example: a software company recording as current-year sales SaaS licences collected upfront for several years requires a downward EBITDA adjustment to reflect the actual deferral of the contract liability. Material findings can reshape the deal — both the earnings base and the EBITDA multiple applied.

Working capital: contract assets and liabilities

• Contract asset: the right to consideration for goods/services already transferred whose collection is conditional on something other than the mere passage of time (e.g. work performed pending certification). A high volume strains working capital and signals difficulty converting profit into cash, as well as exposure to impairment.
• Contract liability: the obligation to transfer goods/services already collected. In M&A this is critical: the buyer must deliver the performance without receiving additional cash, so it is usually treated as a debt-like item in the valuation bridge.

Covenants and refinancing

In project-intensive companies, changes in the accounting for stage of completion affect turnover and margin, altering the coverage ratios of bank covenants (Net Financial Debt / EBITDA, debt service). A prior review of the contracts makes it possible to anticipate breaches and negotiate waivers or a restructuring with lenders.

Red flags of aggressive recognition

• Channel stuffing: pushing product into the channel at period-end, followed by returns. Signal: peaks in the final quarter and receivables growing faster than sales.
• Bill-and-hold: invoicing without transferring control.
• Early recognition of multi-year contracts and large non-recurring implementation fees.
• EBITDA vs. cash divergence: if EBITDA grows but operating cash flow falls, it usually points to aggressive recognition or collection problems.
• Mid-period changes in accounting policy and inconsistencies between financial years.

Improper revenue recognition has, moreover, been the classic vector of the major accounting fraud cases: inflating turnover is the quickest way to dress up an income statement ahead of a crisis.

6. Recommendations for the finance function

The recommendation is not to “document more” in the abstract, but to build a revenue close package and prepare the company for a possible transaction:

• Contractual architecture. Review the standard clauses to define the moment of transfer of control, the unconditional right to payment for work performed and the type of warranties.
• Obligations matrix. By sector and commercial line, separating distinct obligations, contract assets and liabilities.
• Policy on claims, bonuses and penalties. Requiring documentation of enforceability, probability of collection and risk of reversal.
• Scrubbed progress model. Identifying excluded costs, significant materials and budget revisions.
• A permanent normalised-EBITDA bridge. With a rolling schedule of non-recurring items, so as not to be caught out by the buyer’s adjustments.
• Accounting-to-cash synchronisation. Monitoring the gap between accrual and collection through contract assets and liabilities.
• Disclosure connected to management data. Disaggregation of revenue by type of good/service, geography, customer, duration and channel; significant judgements; significant financing; and contract-cost assets.

Operational conclusion

Turnover under IFRS 15 and the PGC is not resolved with a single sector recipe, but through the combination of contractual design, legal analysis, disciplined estimation and auditable operational data. In simple contracts the treatment is intuitive; in complex ones, the right kind of prudence is not to defer revenue “just in case”, but to apply the control model rigorously, document the significant judgements and disclose uncertainty where it exists.

7. Conclusions: how we can help

Revenue recognition has ceased to be a routine accounting-policy question and become an exercise in contractual architecture, legal analysis and disciplined estimation. Under the PGC and IFRS 15, turnover no longer depends on when it is invoiced, but on when control is transferred; and that seemingly technical nuance decides the timing of the result, the quality of EBITDA and, ultimately, the value of the company in a transaction.

At Maraz Corporate Finance we help mid-market companies translate that regulatory complexity into concrete financial decisions. Our work in this area covers:

• Reviewing revenue-recognition policies and their impact on the income statement, within our financial advisory and fractional CFO
• Financial due diligence on purchases, where we analyse the sustainability of turnover, normalise EBITDA and detect aggressive recognition that affects price. See our due diligence
• Business valuation, integrating the effect of contract assets and liabilities into the net-debt and working-capital bridge. More at business valuation.
• Restructuring and refinancing, anticipating the impact of the accounting criterion on the ratios of bank covenants and negotiating with lenders. See corporate financial restructuring.

If your company faces a complex accounting close, a corporate transaction or a refinancing in which revenue recognition is decisive, our team can help you prepare the information with the rigour that investors, buyers and lenders demand. From our office in Alicante we serve companies throughout Spain.

Shall we talk? Contact Maraz Corporate Finance to discuss how revenue recognition affects your income statement, your valuation or your next transaction. Visit maraz.es or write to us through our contact form.

Javier de Rojas Roca de Togores

Partner – Maraz Corporate Finance

Frequently asked questions - Revenue Recognition

When is revenue recognised for accounting purposes under the PGC and IFRS 15?

Revenue is recognised when the company transfers control of the good or service to the customer, for the amount of consideration to which it expects to be entitled. It is recognised neither when the invoice is issued nor when payment is collected: invoicing and collection are decoupled from the accrual of revenue.

What is the difference between recognising revenue “over time” and “at a point in time”?

Revenue is recognised over time (by stage of completion) if at least one of three criteria is met: the customer consumes the benefit as performance occurs; the customer controls the asset as it is created; or the asset has no alternative use and there is an enforceable right to payment for work done plus a margin. If none is met, revenue is recognised at a point in time, usually on delivery or availability.

How is revenue recognised in the development of off-plan residential housing?

As a general rule, at a point in time (deed and handover of keys), not by stage of completion, because the buyer does not control the home under construction and the developer usually has no enforceable right to be paid for work done plus a margin if the contract is terminated. Advances received are a contract liability, not revenue, until handover. The outcome nonetheless depends on the specific contract clauses.

How is a success fee accounted for in an M&A transaction?

The success fee is contingent variable consideration. Under the constraint, it is included in the transaction price only when it is highly probable not to reverse; in practice, it is not recognised until the transaction is virtually closed. The fixed retainer, by contrast, accrues on a straight-line basis over the mandate.

What is the practical difference between Spanish GAAP (PGC) and IFRS 15?

The principle and the five-step model are common. The most relevant practical difference lies in contract acquisition costs: IFRS 15 requires capitalising them where recoverable, whereas the PGC, as a general rule, expenses them with accruals. They also differ in balance-sheet presentation (the PGC does not redesign the balance sheet and concentrates the detail in the notes) and in the classification of certain items such as returns.

Why does revenue recognition matter in a due diligence?

Because it determines the quality of EBITDA. Aggressive recognition (bringing revenue forward, channel stuffing, bill-and-hold) inflates the historical result and the base to which the valuation multiple is applied. In a financial due diligence, turnover is normalised and EBITDA is adjusted to reflect genuinely sustainable revenue.