Revenue – ifrs 15 handbook

Determining whether a commodity transfers over time may 
depend on Criterion 1
An entity that agrees to deliver a commodity considers the nature of its promise 
to determine whether to recognise revenue over time or at a point in time. In 
many contracts to deliver commodities, an entity has promised to transfer a 
good and will consider the point-in-time guidance to determine when control 
transfers. However, there may be scenarios in which an entity has promised 
to provide a service of delivering a commodity that the customer immediately 
consumes and therefore immediately receives the benefits. 
For example, a contract to deliver natural gas to temporary storage may 
represent a promise to deliver a good, whereas a contract to provide natural 
gas to the customer for on-demand consumption may represent a service that 
meets Criterion 1 for over-time recognition.

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118 | Revenue – IFRS 15 handbook
To determine whether the customer immediately consumes the assets and 
receives the benefits as the performance obligation is satisfied, the entity 
evaluates the:
– inherent characteristics of the commodity; 
– contract terms;
– information about the infrastructure and other delivery mechanisms; and 
– other relevant facts and circumstances.
Application to service concession arrangements
IFRIC 12.14
The interpretation on service concession arrangements specifies that an 
operator in a service concession arrangement accounts for construction and 
upgrade services under the revenue standard. Therefore, the operator applies 
the criteria in the standard to determine whether construction and upgrade 
services are separate performance obligations and recognises revenue as it 
satisfies the performance obligations over time or at a point in time.
In many situations, revenue from construction and upgrade services under 
service concession arrangements will be recognised over time because 
Criterion 2 and/or Criterion 3 will be met.