Here's an explanation of the five-step model proposed by IFRS 15 for revenue recognition:

1. Identify the Contract(s) with a Customer: The first step involves identifying a contract with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations. IFRS 15 applies to each contract that has been agreed upon with a customer, except for certain specified contracts.

Purpose: To establish the applicability of IFRS 15 and to set the boundaries of the revenue recognition process.

2.Identify the Performance Obligations in the Contract: Once the contract is established, the entity needs to identify its performance obligations. A performance obligation could be a promise to deliver a product, provide a service, or carry out a task.

Purpose: To identify the distinct goods or services that the entity has promised to the customer. Each distinct good or service represents a separate performance obligation.

3.Determine the Transaction Price: The transaction price is the amount of consideration that an entity expects to receive in exchange for transferring goods or services to a customer.

Purpose: To determine the amount of revenue to be recognized. The transaction price may include variable consideration, significant financing components, non-cash consideration, and consideration payable to a customer.

4.Allocate the Transaction Price to the Performance Obligations in the Contract: The transaction price is allocated to the various performance obligations in a contract based on the stand-alone selling prices of each distinct good or service promised in the contract.

Purpose: To determine the amount of revenue to be recognized as each performance obligation is satisfied.

5.Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation: An entity should recognize revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. This could occur over time or at a point in time.

Purpose: To recognize revenue in the entity's financial statements. The timing and pattern of revenue recognition depend on the nature of the performance obligation and when control of the good or service is transferred to the customer.

This model is designed to provide a structured approach to revenue recognition that can be applied consistently across different industries and transaction types, enhancing comparability and reliability of revenue information.