Module I· Revenue Recognition (IFRS 15)Basic
Question
What does the realization principle under HGB mean, and how does it differ from IFRS 15?
Answer
HGB realization principle
Revenue is recognized only when it is realized, typically when delivery or service completion has occurred and the claim is sufficiently certain.
IFRS 15
Uses a control-transfer model and can recognize revenue over time if the criteria are met.
Main difference
HGB is generally more conservative and creditor-protection oriented. IFRS 15 is more economics- and contract-performance based.
Implication
A long-term project might have smoother over-time revenue under IFRS 15, while HGB may recognize later or more cautiously depending on the contract and local rules.
Pitch tip
In HGB-to-IFRS bridges, revenue timing is often one of the largest EBITDA bridge items for project, software, and engineering businesses.