Contract liability
In one sentenceA business's obligation to provide goods or services to a customer who has paid, or whose payment is due, before performance; it is IFRS 15's name for what is known as deferred revenue.
Simply put
When the customer pays in advance, you have not earned anything yet: you still have to provide the service. So the amount is recorded as a contract liability, and it becomes revenue as you perform each part.
In statements prepared under international standards you may find the name “contract liabilities” instead of “deferred revenue” or “advances from customers”; the idea is the same.
Worked example
A sports club received an annual subscription of 12,000 SAR in advance (before VAT for simplicity) at the start of the year, and 3 months have passed.
Monthly revenue: 12,000 ÷ 121,000 SAR
Revenue earned after 3 months: 1,000 × 33,000 SAR
Remaining contract liability: 12,000 − 3,0009,000 SAR
Don't confuse it with
Deferred revenueThe common name for the same idea; contract liability is the term IFRS 15 uses.