Revenue – ifrs 15 handbook

Criterion
Conclusion Rationale
1
Not met
If B did not issue the professional opinion and C 
hired another consulting firm, then the other firm 
would need to substantially reperform the work 
completed to date, because it would not have the 
benefit of any work in progress performed by B. 
Accordingly, C does not simultaneously receive 
and consume the benefits of its performance.
2
Not met
B is not creating or enhancing an asset of which 
C obtains control as it performs because the 
professional opinion is delivered to C only on 
completion.
3
Met
The development of the professional opinion 
does not create an asset with an alternative 
use to B, because it relates to facts and 
circumstances that are specific to C. Therefore, 
there is a practical limitation on B’s ability to 
readily direct the asset to another customer. 
The contract’s terms provide B with an 
enforceable right to payment for its performance 
completed to date and its costs incurred plus a 
reasonable margin.
Because one of the three criteria is met, B recognises revenue relating to the 
consulting services over time.
Conversely, if B determined that it did not have a legally enforceable right to 
payment if C terminated the consulting contract for reasons other than B’s 
failure to perform as promised, then none of the three criteria would be met. In 
that situation, the revenue from the consulting service would be recognised at 
a point in time – probably on completion of the engagement and delivery of the 
professional opinion.

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124 | Revenue – IFRS 15 handbook
Example 5 – Applying the over-time criteria: Sales of real estate: No