Remaining performance obligations (RPO)
Remaining performance obligations (RPO) is the disclosure of the transaction price allocated to performance obligations that are unsatisfied, or partly unsatisfied, at the reporting date, with an explanation of when the entity expects to recognise it. It combines deferred revenue and contracted amounts not yet invoiced.
Standard references
- ASC 606606-10-50-13 to 50-15
- IFRS 15paragraphs 120–122
- Ind AS 115paragraphs 120–122
Worked example
Illustrative: a non-cancellable three-year contract for $90,000, billed $30,000 annually in advance from 1 January 2026. Reporting date 30 June 2026.
- Recognised to date: 6 × $2,500 = $15,000. Deferred revenue: $15,000. Not yet billed: $60,000.
- RPO = $15,000 + $60,000 = $75,000.
- Within 12 months (July 2026–June 2027): $30,000. Thereafter (July 2027–December 2028): 18 × $2,500 = $45,000.
Result: RPO of $75,000: $30,000 within a year and $45,000 after.
Illustrative figures for explanation only, not taken from a real contract.
Common mistakes
- Including periods the customer can cancel without substantive penalty.
- Leaving out contracted amounts that have not been billed.
- Treating RPO as the same thing as bookings or ARR.