RSM Poland


IFRS 15 – Revenue from Contracts with Customers (part 10). Additional guidance

Aleksandra SYSIAK
Audit Junior Manager at RSM Poland

IFRS 15 includes detailed principles to be applied in certain areas of industry-specific accounting, and we have already presented some of them in our recent posts. It should be recalled that the additional guidance included in Appendix B to the standard is obligatory. In this article, we are going to focus on a general discussion of some of these issues.

Consignment agreement

If an entity delivers a product to another party for sale to end customers, the entity shall evaluate whether that other party has obtained control of the delivered product at that point in time.  This product may be held in a consignment arrangement, if that other party has not obtained control of the product. Accordingly, the entity does not recognise revenue upon delivery of a product to another party if the product is held on consignment.

The entity considers the following factors as indicators of a consignment arrangement:

  • the product is controlled by the entity until a specified event occurs, such as the sale of the dealer’s product to a customer or until a specified period expires;
  • the entity is able to require the return of the product or transfer the product to a third party (e.g. a dealer);
  • the dealer does not have an unconditional obligation to pay for the product (although it may be required to pay a deposit).

Dealer or principal

If another party is involved in the delivery of goods or services, the entity shall determine whether it is a dealer or a principal.

The table below illustrates indicators presented in the standard as necessary for determining whether the entity is a dealer or a principal.

  Principal Dealer

Performance obligation is to:

deliver certain goods or services ensure the delivery of goods or services by another entity
Dodatkowo: has control over the promised good or service before it is transferred to the customer,

does not have control over the good or service before it is transferred to the customer, as evidenced by the following:

  • another entity is chiefly responsible for contract performance,
  • the entity does not bear the risk of storing stocks before or after the goods are ordered by the customer, in transport or return,
  • the entity cannot freely price the goods or services of another entity (as a result, the benefits it may obtain from these goods or services are limited),
  • remuneration takes the form of a commission fee,
  • the entity is not exposed to credit risk in respect of the amount due from the customer for the goods or services delivered by another entity.
Revenue is recognised: in the amount of gross consideration to which it is entitled in return for the transferred goods or services in the amount of any payment or commission to which it is entitled in return for ensuring that goods or services are delivered by another entity. The payment or commission may be a net consideration the entity keeps after paying a consideration to another entity in return for the goods or services delivered by this entity.
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The chart below presents two types of warranties according to IFRS 15. In order to recognise the warranty in the books, it is essential to determine what type it is.


In the first case, if the warranty only provides the customer with assurance that a given product will function as the parties intended, the warranty is recognised under IAS 37 Provisions, contingent liabilities and contingent assets. This type of warranty does not give rise to a separate performance obligation.

If the customer can purchase the warranty separately (e.g. the warranty is priced or negotiated separately), the warranty is a distinct service and is accounted for as a performance obligation, which requires a portion of the transaction price to be allocated to it.

If an entity promises both an assurance-type warranty and a service-type warranty but cannot reasonably account for them separately, both warranties should be accounted for together as a single performance obligation.

Customer options

Contracts may include different forms of incentives or customer award points that will be delivered in the future if certain conditions are met. The standard refers to such transactions as customer options for additional goods or services which give rise to a performance obligation in the contract only when they provide a material right to the customer that the customer would not have received without entering into that contract. In such case, the customer is actually paying the entity in advance for future goods or services, and the entity shall recognise revenues when these future goods or services are transferred or when the option expires.

According to IFRS 15, the transaction price shall be allocated to a performance obligation identified in the option based on the stand-alone selling price. In practice, if the stand-alone selling price is not directly observable, the entity is required to estimate it. This estimate should reflect the discount that the customer would obtain when exercising a given option, adjusted for any discount that the customer could receive without exercising the option, and the likelihood that the option will be exercised.


When a customer makes a non-refundable prepayment to the entity, the customer has a right to obtain goods or services in the future. However, customers may not always exercise all of their contractual rights. Those unexercised rights are referred to as breakage in the standard.

There are two possible scenarios in the case of a breakage:

Non-refundable fees

Certain contracts include non-refundable upfront fees, such as e.g. joining fees in fitness centres, activation fees (in telecommunication services) or other initial fees.

In the case of such fees, the entity first determines whether the activities related to these fees represent a performance obligation, i.e. whether the customer will receive any goods or services as a result of this fee. If no distinct goods or services are transferred as a result of this fee, this fee is an advance payment for future goods or services. If the fee relates to a good or service, the entity shall evaluate whether to account for the good or service as a separate performance obligation.

Repurchase agreements

The standard defines a repurchase agreement as a contract in which the entity sells an asset and (either in the same contact or another contract) promises or has the option to repurchase the asset.

It should be emphasised that the repurchased asset may be the asset that was originally sold, an asset that is substantially the same as the asset that was originally sold or another asset, of which the asset that was originally sold was a component. 

Repurchase agreements may take three forms:

  • an entity’s obligation to repurchase the asset (a forward contract);
  • an entity’s right to repurchase the asset (a call option);
  • an entity’s right to repurchase the asset at the customer’s request (a put option).

Below you will find the method of proceeding in different cases.

Forward contract or call option

Both in the case of a forward contract and a call option, the customer does not obtain control of the asset because the customer is limited in its ability to direct the use of the asset.


Put option

In the case of a put option, the procedure is as follows:


It is a good idea to remember that when dealing both with call options and put options, if the option lapses unexercised, the entity shall derecognise the liability and recognise revenue. In addition, when comparing the selling price and the repurchase price, the entity shall consider the time value of money.

Appendix B to IFRS 15 also presents other industry-specific guidelines that have been discussed in other articles on the practical application of the standard. 

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