Revenue – ifrs 15 handbook

Example 12 – Discretionary credit: Service quality issue
Telco F provides a customer with a credit in the current month due to a short 
period of service quality issues experienced in the prior month (often referred 
to as a ‘goodwill credit’). F determines that this results in a change in the 
transaction price, rather than variable consideration (see 
Section 3.1
). Because 
the goodwill credit relates to a satisfied performance obligation, the credit 
is recognised in its entirety in the month in which it is granted (i.e. when F 
promises to pay the consideration).

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© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
112 | Revenue – IFRS 15 handbook
Example 13 – Discretionary credit: Retention
Telco G grants a one-time credit of 50 to a customer in Month 14 of a two-year 
contract. The credit is discretionary and is granted as a commercial gesture, not 
in response to prior service issues (often referred to as a ‘retention credit’). The 
contract includes a subsidised handset and a voice and data plan.
G does not regularly provide these credits and therefore customers do not 
expect them to be granted. Therefore, G concludes that this is a change in the 
transaction price and not variable consideration (see 
Section 3.1
). Because 
the credit does not relate to a satisfied performance obligation, the change 
in transaction price resulting from the credit is accounted for as a contract 
modification and recognised over the remaining term of the contract (see 
Section 8.2
).
If, in this example, rather than providing a one-time credit, G granted a discount 
of 5 per month for the remaining contract term, then G would also conclude that 
it was a change in the transaction price. It would apply the contract modification 
guidance and recognise the credit over the remaining term of the contract (see 
Section 8.2
).

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© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
5 
Step 5 – Recognise 
revenue when or as 
the entity satisfies a 
performance obligation
Overview
An entity recognises revenue when or as it satisfies a performance obligation by 
transferring a good or service to a customer, either at a point in time (when) or 
over time (as).
A good or service is ‘transferred’ when or as the customer obtains control of it.
IFRS 15.32
At contract inception, an entity first evaluates whether it transfers control of the good 
or service over time – if not, then it transfers control at a point in time.
Identify an appropriate method
to measure progress
(see Section 5.3)
Apply that method to recognise
revenue over time
Recognise revenue at the point in
time at which control of the good
or service is transferred
(see Section 5.4)
Yes
No