Close & reporting
Revenue recognition (ASC 606 / IFRS 15)
Revenue recorded when it is actually earned rather than when cash lands, following the five-step model under HKFRS 15, the Hong Kong standard that mirrors IFRS 15 and, for a US-reporting parent, ASC 606. Built so a subscription, bundled or multi-year contract is recognised correctly across the months it covers.
Management report
Illustrative client · August 2026
HKD
| Line | Aug | Jul | |
|---|---|---|---|
| Revenue | 142,380 | 131,904 | +10,476 |
| Cost of sales | (51,260) | (48,115) | (3,145) |
| Gross profit | 91,120 | 83,789 | +7,331 |
| Payroll | (46,300) | (45,900) | (400) |
| SoftwareNoted | (6,480) | (5,490) | (990) |
| Rent | (8,000) | (8,000) | 0 |
| Other operating | (9,215) | (9,870) | +655 |
| Net income | 21,125 | 14,529 | +6,596 |
Reviewer's note
Software is up on last month after two seats were added mid-month. Revenue includes one milestone invoice that will not repeat next month.
Illustrative. An example of the document, not a client's figures.
The standard that applies in Hong Kong
Hong Kong companies report revenue under HKFRS 15, which follows the same five-step model as IFRS 15: identify the contract, identify the separate performance obligations inside it, work out the transaction price, allocate that price across each obligation, and recognise revenue as each obligation is satisfied. A Hong Kong subsidiary of a US-reporting group sees the same mechanics again under ASC 606, since the two standards share the same underlying model even though they are separately issued.
Where it actually bites
Any Hong Kong business selling multi-year contracts, bundled products and services, or charging an upfront fee tied to ongoing delivery needs a recognition schedule, not just a subscription software company. A services firm billing a retainer covering several months of work, or a trading company bundling goods with an installation service, both need the same discipline.
What the schedule shows
Contracts reviewed and separated into distinct performance obligations, the transaction price allocated across each one, and a month-by-month recognition schedule tracked against each contract's term, with deferred and unbilled revenue reconciled to that schedule.
Judgment gets written down
Where a contract is not straightforward, such as a bundled deal with an unclear standalone price for one component, the judgment behind the recognition treatment is documented in a memo, so the same conclusion holds up whether it is your management, an investor or the practising Hong Kong CPA doing the statutory audit asking about it later.
Feeds directly into
The recognition schedule reconciles into deferred revenue and underpins the month-end close each period.
Questions
Frequently asked questions: Revenue recognition (ASC 606 / IFRS 15)
Does HKFRS 15 apply to businesses outside software subscriptions?
Yes. Any Hong Kong business with multi-year contracts, bundled products and services, or upfront fees tied to ongoing delivery needs a recognition schedule, not only subscription companies.
How does this relate to ASC 606?
ASC 606 is the US standard built on the same five-step model as HKFRS 15 and IFRS 15, so a Hong Kong subsidiary of a US-reporting group is applying broadly the same mechanics under both names.
What is the difference between deferred and unbilled revenue?
Deferred revenue is cash collected before it is earned. Unbilled revenue is the reverse: work already delivered before an invoice has gone out.
Who decides how a tricky bundled contract is treated?
The judgment is worked through with you and documented in a memo, so the treatment holds up under later review, including by the practising Hong Kong CPA performing the statutory audit.
Does a simple one-time product sale need the full five-step model applied?
It still runs through the same framework, but a straightforward sale with no ongoing obligation resolves quickly at the point of delivery; the model matters most where a contract bundles goods, services or milestones together.
Does this apply outside of software subscriptions?
Yes. Any business with multi-year contracts, bundled products and services, or upfront fees tied to ongoing delivery needs a recognition schedule, not only SaaS companies.
What is the difference between deferred revenue and unbilled revenue?
Deferred revenue is cash collected before it is earned. Unbilled revenue is the reverse: work delivered before an invoice goes out.
How do we get started with revenue recognition (ASC 606 / IFRS 15)?
Getting started with revenue recognition (ASC 606 / IFRS 15) begins with a short review of your current records and software access. Once that is done we confirm scope and timing in writing, and ongoing work begins on the schedule agreed with you.
What if our records for revenue recognition (ASC 606 / IFRS 15) are not up to date?
If your records are behind, we scope a catch-up first so revenue recognition (ASC 606 / IFRS 15) starts from a clean, reconciled base. That catch-up is priced and timed separately from the ongoing engagement, so you always know what each part costs.
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Talk to the team that would run your books
A short call covers your setup, your software and what a first month would look like. You get a written scope and price after it.