When performance obligations are satisfied over time, entities need to measure their progress toward the complete satisfaction of the performance obligation. There are generally two types of methods that can be used to measure the progress, as per IFRS 15:

1. Output Methods: Output methods recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. This could be measured by surveying the work performed, units produced, units delivered, milestones reached, or other relevant output measures.
2. For example, a construction company building a bridge could measure progress based on the proportion of the bridge completed, such as the number of segments installed relative to the total number of segments to be installed.
3. Input Methods: Input methods recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of the performance obligation (for example, resources consumed, labor hours expended, costs incurred, time elapsed or machine hours used) relative to the total expected inputs to the satisfaction of that performance obligation.
4. For example, a software development company working on a custom software project could measure progress based on labor hours expended or costs incurred relative to the total expected labor hours or costs.

The objective of these methods is to depict the entity's performance in transferring control of goods or services. The method that best achieves this objective would depend on the nature of the entity's promise to the customer and the goods or services being provided. In some cases, either method could provide a faithful depiction of the entity's performance, while in other cases, one method might be more appropriate than the other.

Now let's take a look at examples for each of the methods for measuring performance satisfied over time:

Output Method:

Let's assume that a publishing company enters into a contract to deliver 10,000 copies of a specific book to a customer. The contract is set for a year, and the company delivers books on a monthly basis. At the end of the sixth month, the company has delivered 5,000 copies.

Using the output method, the company would measure its performance based on the number of books delivered to the customer, relative to the total number of books to be delivered under the contract. At the end of the sixth month, the company has delivered 50% of the books (5,000 out of 10,000), so it could recognize 50% of the revenue from the contract at that point in time.

Input Method:

Assume a software development firm signs a contract to create a custom software program for a client. The contract specifies a fixed price of $100,000, and the company estimates the project will take 1,000 hours of labor.

After working for 300 hours on the project, the company would measure its progress using an input method based on labor hours expended relative to total expected labor hours. The company has completed 30% of the expected labor (300 hours out of 1,000 hours), so it could recognize 30% of the total contract revenue, or $30,000, at that point.

In both cases, the company is recognizing revenue progressively, as the performance obligation is satisfied over time. The specific method used depends on the nature of the goods or services being provided and the best way to measure the transfer of control to the customer.