With Q3 close just weeks away, Calgary finance leaders are entering the final stretch before year-end. And if there’s one area that deserves a closer look right now, it’s revenue recognition.
Revenue recognition might seem like a settled matter, but cutoff errors are one of the most common, and costly, mistakes controllers catch. As one industry observer put it, a controller catches “the cutoff error, the missing accrual, the cash-vs-accrual mismatch”. With Q3 ending September 30, now is the time to review your revenue recognition policies, particularly for contracts with performance obligations that cross year-end.
The Five-Step Framework
Whether you’re following IFRS 15 or the new FRS 102 revenue recognition model (effective for periods beginning on or after January 1, 2026), the framework is consistent. The five-step model requires you to:
Identify the contract(s) with a customer – Not all agreements are contracts. Ensure you have a valid contract with enforceable rights and obligations.
Identify the performance obligations – What goods or services are you promising to deliver? Misidentifying distinct goods or services can lead to incorrect revenue recognition.
Determine the transaction price – Consider variable consideration, discounts, and incentives. Tighten your estimates, variable pricing, usage fees, and incentives must be recognised cautiously, with a bias towards deferral.
Allocate the price to performance obligations – Incorrect allocation can distort revenue recognition across performance obligations.
Recognize revenue when (or as) performance obligations are satisfied – This is where judgment comes in. Are you recognizing revenue over time or at a point in time?
Common Pitfalls to Watch For
Failing to identify all performance obligations. If you’re bundling goods and services, you need to separate them. A common mistake is treating multiple deliverables as a single obligation when they should be accounted for separately.
Misjudging the transfer of control. This can result in premature or delayed revenue recognition. Ask yourself: has the customer taken control of the asset? Have they accepted it?
Neglecting to update estimates. Variable consideration, progress toward completion, and other estimates need to be reviewed regularly, not just at year-end.
Recognizing annual billings entirely in the month received. For SaaS and subscription-based businesses, revenue should be recognized ratably over the service period, not upfront.
What Finance Leaders Should Be Doing This September
Review your contracts. Are there performance obligations that cross year-end? How are you measuring progress toward completion? Are your estimates current?
Check your cutoff procedures. Are you recognizing revenue in the correct period? This is especially important for contracts with milestone payments or percentage-of-completion accounting.
Document your judgments. Regulators and auditors will want to see the rationale behind your revenue recognition decisions. If you’re making significant judgments, document them.
Look ahead to 2026. With new revenue recognition standards taking effect for some entities on January 1, 2026, now is the time to assess your readiness.
The Bottom Line
Revenue recognition is one of the most judgment-intensive areas of accounting. With Q3 close approaching, Calgary finance leaders have a window to review their policies, catch errors, and enter year-end with confidence. Don’t wait until December to find the cutoff error; address it now.
About BullsEye Recruitment Inc.
BullsEye Recruitment Inc. is a Calgary-based boutique recruitment firm specializing in placing experienced accounting and finance professionals at senior levels. We understand the Alberta economy, the challenges Controllers face, and what it takes to find the right people the first time.
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