What is an essential criterion for recognizing revenue under IFRS?

Under IFRS, an essential criterion for recognizing revenue is that the transaction must be measured reliably. This criterion ensures that the recognized revenue reflects the actual economic reality of the transaction and provides a basis for the amounts to be reported in the financial statements. If the measurement of the transaction is not reliable, it would not be appropriate to recognize revenue, as it could lead to misleading financial reporting.

Reliable measurement involves determining the transaction price, which is crucial for accurately reflecting the performance and the obligations of the parties involved. It also encompasses the ability to estimate the costs associated with fulfilling the obligations, assess the probability of economic benefits flowing to the entity, and ascertain whether the performance obligations have been met.

In contrast, while retaining risk and rewards, collecting cash, and fulfilling performance obligations are all important aspects of revenue recognition, the reliability of measurement is foundational to ensure that revenue is recognized in a faithful representation manner. Thus, it serves as a key criterion in the revenue recognition process under IFRS.