When sponsorship income counts: splitting a package
How an organiser splits a sponsorship package of branding, a stand and delegate passes into parts, and decides when each part counts as income.
By Achekam · · 5 min read · For Events businesses in South Africa, Nigeria, Kenya
The headline sponsor signs in March for a conference in September. Its package includes its logo on the event website and every e-mail campaign from the day of signing, an exhibition stand in the foyer, a set number of delegate passes, a speaking slot in the opening session and a thank-you in the post-event report. The sponsor pays the full amount within a month.
The organiser now has a large sum in the bank and a question for its management accounts: is that money income in April, in September, or somewhere in between? Booking it all on receipt makes the early months look excellent and the event month look poor. Leaving it all until the event ignores months of branding already delivered. The honest answer lies in splitting the package.
Five steps, applied to a sponsorship
IFRS 15 sets out five steps for recognising revenue: identify the contract with the customer; identify the performance obligations in it; determine the transaction price; allocate that price to each performance obligation; and recognise revenue when each obligation is satisfied. The IFRS Foundation's page on IFRS 15 summarises the standard and these steps.
For a sponsorship:
- The contract is the signed sponsorship agreement.
- The performance obligations are the separate benefits promised.
- The transaction price is the package fee, excluding VAT.
- Allocation shares that fee across the benefits.
- Recognition happens as each benefit is delivered.
If your business reports under a framework other than full IFRS, such as the IFRS for SMEs Accounting Standard, your accountant will tell you where its revenue rules differ. The reasoning below is still a useful way to think about the package.
Which benefits are separate
ACCA explains that a good or service is a distinct performance obligation if the customer can benefit from it on its own, or with other readily available resources, and it is separately identifiable from the other elements of the contract.
Run each benefit through that test:
| Benefit | Can the sponsor benefit from it on its own? | Likely treatment |
|---|---|---|
| Logo on website and campaigns | Yes, exposure to the audience during the build-up | Separate benefit, delivered over the campaign |
| Exhibition stand | Yes, meeting delegates on the day | Separate benefit, delivered at the event |
| Delegate passes | Yes, its staff attend the event | Separate benefit, delivered at the event |
| Speaking slot | Yes, a platform at the event | Separate, or grouped with the stand and passes |
| Post-event thank-you | Usually minor | Often grouped with the branding |
Agree the grouping with your accountant. The aim is to separate benefits that are delivered at clearly different times, because those are the ones that change when income is counted.
Sharing the fee by stand-alone selling price
ACCA explains that IFRS 15 allocates the transaction price at the start of the contract based on relative stand-alone selling prices, and that the best evidence of a stand-alone selling price is the observable price when the entity sells the item separately.
An organiser often has those prices already. Stands are sold to exhibitors from a price list. Delegate passes are sold to the public. Branding-only packages may be sold to smaller sponsors. Where a benefit is never sold on its own, such as the opening-session speaking slot, the organiser estimates a price on a reasonable basis and writes down how.
A worked example in words. The organiser lists the stand at its exhibitor price, the passes at the delegate ticket price, and the branding at the price of its branding-only package. Added together, these come to more than the package fee, because the package is sold at a discount. The organiser works out each benefit's share of that total and applies the same share to the actual package fee. The discount is spread across all the benefits rather than landing on one.
When each part counts as income
IFRS 15 says revenue is recognised when a performance obligation is satisfied by transferring the promised good or service to the customer, which is when the customer obtains control of it. An obligation may be satisfied at a point in time or over time, and for an obligation satisfied over time the entity selects an appropriate measure of progress.
For the package:
- Branding is delivered across the promotion period, from signing to the event. Spreading its share across those months, or in line with the campaigns actually sent, reflects how it is delivered.
- The stand, passes and speaking slot are delivered at the event, so their share counts as income in the month the event takes place.
- The post-event report, if treated separately, counts when it is issued.
If the event is postponed, the benefits due on the day are not yet delivered, and their share stays unearned until it takes place.
Recording it in Achekam
In Achekam, issuing a customer invoice takes the next number in its sequence and posts it to the ledger as debtors, sales and output VAT. When the sponsor is invoiced in advance, the full package therefore reaches sales on the day of issue.
Correct the timing with manual journals. At the end of the month the invoice is issued, post a journal moving the share not yet earned out of sales and into a liability account for sponsorship received in advance. Each month after that, release the branding share for that month into income. In the event month, release the shares for the stand, passes and speaking slot. Achekam refuses a journal that does not balance or is dated in a closed month, and a posted journal is corrected only by reversing it, so post each release before the month is closed.
The management accounts then show the result. They give an income statement for a chosen period beside the period before, and a balance sheet at period end, built from the business's own journals and exportable as PDF or CSV. The unearned balance sits on the balance sheet until the event, which is where a lender or investor would expect to see it.
Wording that makes the split clear
The easiest split is the one the agreement already spells out. When drafting sponsorship agreements:
- List each benefit separately, with the date or period it will be delivered.
- Refer to the price each benefit sells for on its own, where one exists.
- Say what happens to benefits if the event is postponed or cancelled.
- State what substitutions are allowed if a speaker or space becomes unavailable.
Before the next sponsor signs
Write your standard benefits and their stand-alone prices into one schedule, agree the allocation method with your accountant, and use it for every package. For ticket money that arrives early, read presales before the event, and for events that run over a month end, an event across month end.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
