Revenue – ifrs 15 handbook

Example 6 – Allocating variable consideration: Variable 
consideration allocated entirely to one performance obligation in 
the contract
IFRS 15.IE179–IE182
Contract
Company M
Price: 800 or 1,000
Price: 800
Equipment X
Equipment Y
Company M enters into a contract with Customer N for two pieces of 
equipment, Equipment X and Equipment Y. M determines that X and Y represent 
two performance obligations, each satisfied at a point in time. The stand-alone 
selling prices of X and Y are 800 and 1,000, respectively.
The price stated in the contract for X is a fixed amount of 800. For Y, the price 
is 800 if the equipment is used by N to produce 1,000 products or less in 
Year 1 and 1,000 if it’s used to produce more than 1,000 products in Year 1. M 
estimates that it will be entitled to variable consideration of 1,000 and that it is 
highly probable that a significant reversal in the amount of cumulative revenue 
recognised will not occur.
M allocates the estimated 1,000 in variable consideration entirely to Y because:
– the variable payment relates specifically to Y; and
– the estimated amount of variable consideration and the fixed amount for X 
approximate the stand-alone selling prices of each product.
M recognises revenue for X and Y of 800 and 1,000, respectively, when control 
of the good is transferred to N.

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4 Step 4 – Allocate the transaction price to the performance obligations in the contract | 107
4.2 Allocate the transaction price
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Example 7 – Allocating variable consideration: Each shipment is a 
distinct performance obligation
Mining Company M enters into a contract to deliver 12 monthly shipments 
of gold ore to Customer C. Each shipment is priced based on the spot price 
for gold at the date of the shipment. M determines that each shipment is a 
distinct performance obligation. M considers that the amount paid by C for 
a specific shipment of gold ore is independent of past or future shipments – 
i.e. the amount paid is resolved entirely as a result of delivering one specific 
shipment. Therefore, M concludes that the variability resulting from changes 
in market price relates directly to each distinct monthly shipment and that 
allocating this variable consideration to each shipment is consistent with the 
allocation objective.