Susan Maina is a content writer at Mugo and Company, where she simplifies Accounting, Auditing, and Forensic Audit services with her finance expertise.
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Let’s start with a simple question:
If your business in Kenya signs contracts with customers — maybe you’re a construction company in Kilimani building apartments, when exactly should you record your income as revenue?
That’s the million-shilling question IFRS 15 – Revenue from Contracts with Customers helps you answer.
IFRS 15 is one of the most important accounting standards under the International Financial Reporting Standards (IFRS) framework.
It sets out when and how you should recognise revenue from contracts with customers, ensuring your financial statements reflect what you’ve actually earned — not just what you’ve been paid.
For Kenyan businesses, proper revenue recognition under IFRS 15 matters because it builds trust, consistency, and transparency — with investors, lenders, regulators, and clients alike.
This guide by Mugo & Co explains IFRS 15 in Kenya – how it was adopted, what it requires, and how it impacts your business’s financial reporting today.
Let’s jump right in!
Not sure how IFRS 15 applies to your contracts in Kenya?
Talk to our IFRS 15 experts today.
Book your First Consultation For FreeThink of IFRS 15 as your business’s revenue recognition rulebook.
It explains when and how to record income from your contracts with customers — in a fair and consistent way.
In plain language:
For example:
In other words, IFRS 15 – Revenue from Contracts with Customers focuses on performance, not just payment.
Let Mugo & Co. guide you through IFRS 15 step-by-step.
Book your First Consultation For FreeBefore IFRS 15 came along, revenue recognition in Kenya was guided by a patchwork of older standards — mainly IAS 11 (Construction Contracts) and IAS 18 (Revenue) — along with several confusing interpretations.
The problem? There was no single rulebook.
IFRS 15 – Revenue from Contracts with Customers changed all that.
It replaced the old, inconsistent methods with one unified model for recognising revenue across all industries.
Whether you’re Safaricom selling data bundles, a contractor building roads, or a professional firm like Mugo & Co offering accounting and audit services — IFRS 15 gives everyone the same clear framework to follow.
Here’s how IFRS 15 came to be — from scattered old rules to one clear, global standard that now guides how Kenyan businesses recognise revenue.
| Period | What Happened |
|---|---|
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Early 1990s
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Revenue recognition relied on two main standards — IAS 11 for construction contracts and IAS 18 for general revenue.
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2000s
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Over time, extra interpretations were added (like IFRIC 13, 15, and 18), but they often overlapped and caused confusion among businesses and auditors.
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May 2014
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The IASB issued IFRS 15 – Revenue from Contracts with Customers, finally replacing all the older, fragmented rules with one clear model.
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January 2018
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IFRS 15 officially took effect, setting a consistent framework for recognising revenue worldwide.
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2018 (Kenya)
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The Institute of Certified Public Accountants of Kenya (ICPAK) adopted IFRS 15, making it the standard for Kenyan entities.
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Today
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IFRS 15 remains the foundation for how Kenyan companies — from contractors to tech firms — recognise and report revenue from customer contracts.
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IFRS 15 in Kenya applies to almost every contract where your business earns income by delivering goods or services to customers.
Whether you’re a construction company building apartments, a manufacturer supplying equipment, or a consulting firm offering professional services, IFRS 15 guides how and when you should recognise that revenue.
However, not every contract falls under IFRS 15.
Some are covered by other specific IFRS standards, including:
In short — if your revenue comes from selling goods or providing services, IFRS 15 applies to you.
1 January 2018.
That’s when IFRS 15 officially came into effect worldwide — and Kenya followed suit soon after, through adoption by the Institute of Certified Public Accountants of Kenya (ICPAK).
From that date, any business preparing financial statements under full IFRS has been required to comply.
In other words, if you report under IFRS — IFRS 15 isn’t optional, it’s part of the rulebook.
The main goal of IFRS 15 in Kenya is simple — to make sure the revenue you report truly reflects what your business has earned.
It ensures your financial statements tell a clear, consistent, and honest story about your performance — one that investors, lenders, and regulators can trust when making key decisions.
In short: transparency + consistency = trust.
IFRS 15 introduces a clear, 5-step model to recognise revenue properly:
| Step | What It Means | Simple Illustrative Example |
|---|---|---|
|
1. Identify the Contract
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Confirm there’s a clear agreement — written, verbal, or implied — that defines rights, responsibilities, and payment terms.
|
A construction company in Westlands signs a KSh 50 million contract to build office space — that’s the contract.
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2. Identify the Performance Obligations
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Determine what exactly you’ve promised to deliver — goods, services, or both. Each distinct promise is a performance obligation.
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A Nairobi tech firm sells software and provides annual maintenance — those are two separate obligations.
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3. Determine the Transaction Price
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Establish how much you expect to receive, factoring in discounts, penalties, or performance bonuses.
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A supplier offers a 10% discount for early payment — the transaction price is adjusted accordingly.
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4️. Allocate the Transaction Price
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If there are multiple obligations, divide the total price based on their standalone value.
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A company selling a phone with a one-year service plan splits the total price between the device and the service.
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5. Recognise Revenue
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Record revenue when control of goods or services passes to the customer — either over time or at a specific point.
|
A contractor building apartments in Kilimani recognises revenue gradually as each phase is completed.
|
Simply put: Record revenue when your customer gets value, not just when the money hits your account.
We’ll help you apply IFRS 15 practically and avoid costly reporting errors.
Book your First Consultation For FreeBefore you can record any revenue, your contract must tick these five boxes.
If even one is missing — hold off, because the transaction isn’t ready for recognition under IFRS 15.
| Criterion | What It Means |
|---|---|
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1. Contract Approved
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Both you and your customer must have agreed to the deal — in writing, verbally, or even by conduct.
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2. Clear Rights & Obligations
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Everyone involved understands what’s expected — who delivers what, and when.
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3. Identifiable Payment Terms
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The payment amount and timing are clearly stated.
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4. Commercial Substance
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The contract will actually change your financial position — there’s real business value involved.
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5. Probable Collection
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It’s likely you’ll get paid. If there’s doubt about collection, you can’t recognise the revenue yet.
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In short: Only recognise revenue when the agreement is real, enforceable, and collectible.
Under IFRS 15, Kenyan businesses must go beyond just stating revenue figures — they need to clearly explain how that revenue is earned and reported.
These disclosures help auditors, investors, and regulators such as ICPAK and the Capital Markets Authority (CMA) understand your revenue recognition practices at a glance.
| Disclosure Area | What to Explain | Example |
|---|---|---|
|
Revenue Recognition Method
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Describe how and when your business recognises revenue — whether over time or at a single point.
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A contractor in Nairobi recognises revenue progressively as building milestones are completed.
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Contract Balances
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Show details of receivables, contract assets, and liabilities (like unearned revenue).
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A software firm lists prepaid annual subscriptions as “unearned revenue” until services are delivered
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Performance Obligations
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Explain what goods or services you’ve promised and how you satisfy those obligations.
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A telecom company discloses how it splits revenue between airtime, data bundles, and handset sales.
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Judgements & Estimates
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Outline the key assumptions used when determining timing or value of revenue.
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A construction firm discloses how it estimates completion percentages for ongoing projects.
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Why this matters: These disclosures make your financial statements transparent and trustworthy — giving investors and regulators confidence in your numbers.
Let Mugo & Co. help you analyse your contracts and recognise revenue the right way.
Book your First Consultation For FreeYes — IFRS 15 is mandatory in Kenya for all entities that prepare financial statements under full IFRS.
That includes:
In simple terms, if your business reports under full IFRS, you must follow IFRS 15 when recognising revenue.
NOTE: Small and medium-sized enterprises (SMEs) that use IFRS for SMEs aren’t required to apply IFRS 15 — but they can adopt it voluntarily to align with international best practices.
Not every business in Kenya is required to apply IFRS 15.
Small and medium-sized enterprises (SMEs) that prepare their financial statements under IFRS for SMEs are exempt from the full requirements of IFRS 15.
However, there’s a catch — if your SME handles complex contracts, works with international donors or partners, or seeks foreign investment, adopting IFRS 15 voluntarily can be a smart move.
It helps your financial statements look more credible, transparent, and comparable with global standards — especially when dealing with investors or lenders outside Kenya.
In short: IFRS 15 may not be mandatory for SMEs, but it can give your business a competitive edge in trust and transparency.
Under IFRS 15 in Kenya, businesses typically deal with two main types of customer contracts:
| Type of Contracts under IFRS 15 | |
|---|---|
|
Fixed-Price Contracts
|
– These have a set price agreed upon at the start — for example, a KSh 10 million construction contract to build an office block in Westlands. – Revenue is recognised gradually as the work progresses, based on milestones or completion percentage. |
|
Variable-Price Contracts
|
– These depend on performance or future outcomes — such as a consulting project that includes performance bonuses or penalties tied to results. – In such cases, the final amount can change, so revenue must be estimated carefully. |
💡 The transaction price under IFRS 15 is simply the total amount you expect to receive from your customer, after considering discounts, rebates, penalties, or bonuses.
Getting this estimate right is crucial — overestimating can inflate your revenue and mislead stakeholders.
Under IFRS 15 – Revenue from Contracts with Customers, there are two main types of warranties, and each is treated differently for revenue recognition.
| Type of Warranties under IFRS 15 | |
|---|---|
|
Assurance Warranties
|
– These are basic guarantees that a product or service will work as promised. – For example, a manufacturer in Nairobi selling generators may offer a one-year warranty to fix defects. This warranty is not a separate performance obligation — it’s part of the original sale, so the revenue is recognised upfront. |
|
Service Warranties
|
– These go beyond the basic guarantee — offering extra services or support over time. – For instance, a car dealership in Kenya selling an extended two-year maintenance plan treats that as a separate service. Revenue here is recognised gradually, over the period of the warranty. |
In short: assurance warranties protect customers, while service warranties create ongoing obligations — and IFRS 15 requires you to account for them differently.
Applying IFRS 15 – Revenue from Contracts with Customers offers several key benefits for Kenyan companies and organisations:
a) More Accurate Revenue Reporting
Businesses can match income to actual performance — ensuring that construction firms, consultancies, and service providers in Kenya record revenue only when value is delivered.
b) Greater Consistency
By following a single, clear standard, IFRS 15 eliminates confusion and ensures your revenue recognition is consistent across all reporting periods.
c) Stronger Investor and Lender Confidence
Banks, investors, and donors (such as development partners and NGOs) trust financial statements that comply with IFRS 15 — improving your credibility and access to funding
d) Alignment with Global Best Practices
IFRS 15 puts Kenyan businesses on par with international standards, making cross-border transactions, partnerships, and audits smoother.
In short: IFRS 15 helps Kenyan businesses record revenue right, build trust, and speak the same financial language as the rest of the world.
While IFRS 15 – Revenue from Contracts with Customers improves transparency, many Kenyan businesses find implementation challenging — especially in sectors with long-term or bundled contracts such as construction, telecoms, manufacturing, and tech.
Common challenges include:
Estimating Variable Consideration
Separating Multiple Deliverables in Bundled Deals
Meeting New Disclosure Requirements
In short: IFRS 15 demands stronger systems, better contract analysis, and more collaboration between accountants and operations teams.
BuildRight Construction Ltd, a Nairobi-based contractor, signs a KSh 100 million deal to build a commercial complex in Westlands over 20 months.
For example:
Result: BuildRight’s revenue reports now show consistent performance across reporting periods — giving banks, investors, and clients a clearer picture of its financial health.
In 2018, the Institute of Certified Public Accountants of Kenya (ICPAK) officially adopted IFRS 15 – Revenue from Contracts with Customers, bringing Kenya in line with global reporting standards.
Since then, Kenyan audit and advisory firms — including Mugo & Co – have supported businesses through:
Result: Kenyan businesses now report revenue more transparently and consistently, strengthening trust with investors, regulators, and stakeholders.
Q1. What is IFRS 15 all about?
IFRS 15 is the accounting standard that explains how and when a business should recognise revenue from contracts with customers. It ensures that the income you report truly reflects the work you’ve done — not just when you get paid.
Q2. What are the five steps of revenue recognition under IFRS 15 in Kenya?
IFRS 15 follows a simple five-step process:
1️⃣ Identify the contract
2️⃣ Identify performance obligations
3️⃣ Determine the transaction price
4️⃣ Allocate the price
5️⃣ Recognise revenue
Q3. Is IFRS 15 difficult to apply in Kenya?
It can feel technical at first, especially for industries like construction or telecoms. But with local examples and professional guidance, most Kenyan businesses can apply it smoothly.
Reach out to Mugo & Co to schedule your free consultation.
Q4. What’s the difference between IFRS 15 and IFRS 16?
IFRS 15 focuses on revenue from customers — how and when to recognise income from contracts.
On the other hand, IFRS 16 deals with leases and right-of-use assets, guiding how businesses account for rented property, equipment, or vehicles.
Q5. Are SMEs required to apply IFRS 15 in Kenya?
No. SMEs that use IFRS for SMEs are exempt from the full IFRS 15 standard. However, some choose to adopt it voluntarily, especially when working with international partners or investors who prefer globally comparable reports.
Have more questions about IFRS 15?
Talk to Mugo & Co — our experts can help you interpret and apply IFRS 15 confidently.
New clients enjoy a free first consultation — get clarity, compliance, and confidence from day one.
At its core, IFRS 15 in Kenya is about fairness, consistency, and transparency — recognising revenue only when it’s truly earned.
If you’re unsure how to apply IFRS 15 to your contracts, don’t guess.
Get expert support from Mugo & Co – a trusted Kenyan audit and accounting firm with over 40 years of experience helping businesses achieve clarity and compliance.
Enjoy your first consultation free — our team will guide you through the IFRS 15 requirements so your financial statements remain clear, credible, and compliant.
Work with Mugo & Co. for clear, consistent, and compliant revenue recognition in Kenya.
Book your First Consultation For FreeThis article is intended for general informational purposes only and should not be considered professional or legal advice. Always consult a qualified accountant or auditor for guidance specific to your business.
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