IFRS 15 Contract modifications – Decision tree

Parties to an arrangement frequently agree to modify the scope or price (or both) of their contract. If that happens, an entity must determine whether the modification is accounted for as a new contract or as part of the existing contract. Generally, it is clear when a contract modification has taken place, but in some circumstances, that determination is more difficult. [see IFRS 15 18 – 19]

IFRS 15 indicates that an entity may have to account for a contract modification prior to the parties reaching final agreement on changes in scope or pricing (or both). Instead of focusing on the finalisation of a modification, IFRS 15 focuses on the enforce-ability of the changes to the rights and … Read more

Revenue from additional goods or services

Under some contracts, entities provide the customer with the right to future purchases of additional tech products or services for an amount below fair value.

Under IFRS 15, such options are separate performance obligations if they provide a material right to the customer that it would not receive without entering into that contract. For example, it may convey a material right if the discount exceeds the range of discounts typically given for those goods or services to that class of customer in that geographical area or market. If an option is a separate performance obligation, a portion of the transaction price is allocated to the option (see Allocation of transaction price to performance obligations). The … Read more

Identify the contract with the customer

This part relates to a complete explanation of IFRS 15 Revenue from contracts with customers in respect of Engineering & Construction contracts, see https://annualreporting.info/revenue-from-engineering-construction-contracts/.


The model in IFRS 15 applies to each contract with a customer. Contracts may be written, oral or implied by an entity’s customary business practices, but must be legally enforceable and meet specified attributes.

Attributes of a contract Identify the construction contract with the customer

To help entities determine whether (and when) their arrangements with customers are contracts within the scope of the model in the standard, the Board identified certain attributes that must be present, as follows [IFRS 15.9]:Contract balances

  • The parties have approved the contract and are committed to perform
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Options to purchase additional goods or services

Contracts frequently include options for customers to purchase additional goods or services in the future. Customer options that provide a material right to the customer (such as a free or discounted good or service) give rise to a separate performance obligation. In this case, the performance obligation is the option itself, rather than the underlying goods or services. Management will allocate a portion of the transaction price to such options, and recognize revenue allocated to the option when the additional goods or services are transferred to the customer, or when the option expires.

The additional consideration that would result from a customer exercising an option in the future is not included in the transaction price for the current contractRead more