Remaining performance obligations
Sector Deep DivesThe transaction price allocated to contracted goods and services not yet delivered, disclosed under IFRS 15.
Also written: RPO, remaining performance obligation, current RPO, cRPO
RPO is the audited answer to the question bookings tries to answer. It is everything a company has contracted to deliver and has not yet recognised as revenue, whether or not it has been invoiced, and IFRS 15 requires it to be disclosed together with when the entity expects to recognise it.
That makes it the sturdier of the two forward measures. Bookings and annual recurring revenue are management measures with definitions that vary between companies and can be changed. RPO is defined by the standard and sits inside the audited accounts.
It covers more than deferred revenue. Deferred revenue is only the part already invoiced and collected; RPO also includes committed amounts that have not been billed yet, which for a multi year contract invoiced annually is most of it.
The portion expected within twelve months, often called current RPO, is the part that maps most closely to next year's revenue. A company whose total RPO grows while the current portion stalls is signing longer contracts rather than selling more this year, and the distinction matters.
Worked example
A three year contract worth €360,000 is signed on 1 October and invoiced a year in advance. By 31 December, €30,000 has been recognised as revenue.
RPO is €330,000: the €90,000 invoiced and unearned, plus the €240,000 committed but not yet billed. Deferred revenue on the balance sheet shows only the €90,000.