IPSAS 47: Revenue will be effective from 1st January 2026 onwards and will replace IPSAS 9: Revenue from exchange transactions, IPSAS 11: Construction contracts, and IPSAS 23: Revenue from non-exchange transactions. IPSAS 47 thus consolidates accounting treatment of all types of revenues into one standard and adopts a two-model approach in classifying revenue. Revenue to a public sector entity either arises from binding arrangements or from non-binding arrangements.

The process for revenue recognition involves the following steps:

• Identify a revenue transaction. At inception, a public sector entity should consider whether or not it has entered into a revenue transaction with or without a binding arrangement.
• Determine whether the revenue is associated with a binding arrangement or a non-binding arrangement. For a binding arrangement to exist, the public sector entity must have enforceable rights and obligations through legal or other administrative means. If there are no such enforceable rights and/or obligations, the revenue transaction be through a non-binding arrangement.
  There is a revenue transaction which confers rights and obligations to the public sector entity and are enforceable through legal or other means, including administrative processes. Binding arrangements need not necessarily be in writing, they could be in writing, could verbal or even by implication.

Revenue from transactions with binding arrangements are recognized when the following conditions are met:

• The parties to the binding arrangement have approved the arrangement.
• The reporting entity can identify each party’s rights under the arrangement.
• The reporting entity can identify the payment terms for the satisfaction of each identified compliance obligation.
• The binding arrangement has economic substance in that the risk and amount of cash flows or service potential of the entity will change as a result of the arrangement; and
• It is probable that the reporting entity will collect the consideration to which it will be entitled for satisfying its compliance obligations in accordance with the terms of the binding arrangement.

When these conditions are met, the revenue to be recognized is measured as a transaction consideration as at the date when the criteria for asset recognition are satisfied. Subsequent to that, assets are measured using IPSAS 41: Financial Instruments.

Revenue from non-binding arrangements
In respect of revenue from transactions with non-binding arrangements, recognize revenue only when:

• The rights conferred by the revenue transaction meet the definition of an asset. That is to say, the revenue transaction confers a right, which is a resource that will result in an inflow of economic benefits to the reporting entity.
• The obligations imposed by the revenue transaction meet the definition of a liability. That is to say, the revenue transaction imposes an obligation that results ultimately in the outflow of economic benefits from the reporting entity.

When these conditions are met, the revenue to be recognized is measured at the transaction consideration as at the date when the criteria for asset recognition are satisfied. Subsequent to that, assets are measured using IPSAS 41: Financial Instruments.