Under IFRS 15, a company should recognize revenue for a contract based on the stage of completion of the services provided, using a cost-to-cost method to estimate progress towards completion. However, if collectability of the contract price is uncertain, the company should recognize revenue only to the extent of the costs incurred that are expected to be recoverable. This approach ensures that revenue is recognized when it is reasonably certain to be collected.

here's an example of how Company B would apply the 5-step model to account for the contract:

Step 1: Identify the contract with a customer

Company B has a contract with a customer to provide services over the next 3 years for a fixed price of $300,000. The contract is enforceable, and there are identifiable performance obligations.

Step 2: Identify the performance obligations

The performance obligation is to provide services over the next 3 years.

Step 3: Determine the transaction price

The transaction price is $300,000.

Step 4: Allocate the transaction price to the performance obligations

Company B determines that the standalone selling price of the services is $100,000 per year. Therefore, the transaction price is allocated equally to each year of the contract, resulting in an allocated transaction price of $100,000 per year.

Step 5: Recognize revenue as the performance obligations are satisfied

Assuming that the collectability of the contract price is uncertain, Company B would recognize revenue based on the expected consideration that is probable of being collected. Let's say that Company B expects to collect 80% of the contract price. Therefore, the company would recognize revenue of $80,000 per year over the 3-year contract period.

In summary, Company B would recognize revenue of $80,000 per year over the 3-year contract period, based on the expected consideration that is probable of being collected.

If the probability of collecting the contract price is zero, then the company should not recognize any revenue for the contract until there is a reasonable expectation of collectability. The collectability of the contract price is a key factor in determining when revenue can be recognized. In such a scenario, the company would need to reassess the collectability of the contract price at each reporting period and adjust revenue recognition accordingly. The company may also need to consider making a provision for any potential bad debt related to the contract.