Revenue – ifrs 15 handbook

Success-based fee arrangements
IFRS 15.9
In some cases, an entity may be entitled to consideration for services 
performed only if a specific outcome is achieved and the customer can 
withdraw from the contract at any time before that event without compensating 
the entity. These arrangements are often referred to as ‘success-based fee 
arrangements’. They are common in the services industry – e.g. real estate 
agents and travel agents. It appears that these arrangements, in which the 
entire amount of the promised consideration is contingent on the achievement 
of a specific outcome, are not contracts with a customer in the scope of the 
revenue standard before the specific outcome is achieved. This is because, in 
these arrangements, the entity does not have enforceable rights to payment 
for the services that it has performed to date and, similarly, the customer has 
no obligations. For example, a property holder enters into a contract with a 
real estate agent to sell their property. Under the contract terms, the property 
holder can cancel the contract at any time without penalty and is obliged to pay 
the real estate agent only if a sale of the property is completed. In this case, a 
contract with a customer arises only when sale of the property is completed, 
because before this point the real estate agent does not have an enforceable 
right to payment, nor does the property holder have an obligation to pay and, as 
such, the agreement does not meet all of the contract existence criteria.
Contracting practices may need to be evaluated by customer 
class
Contracting practices with different classes of customers in the same 
jurisdiction may need to be evaluated. For example, an entity may have a 
business practice of using written contracts. However, the entity may enter into 
arrangements with certain customers whose business practices of providing 
evidence of an arrangement differ from the entity’s own practice.
If an entity establishes a different practice for evidencing an arrangement for 
specific customers, including implied contracts for various classes of customers 
(e.g. by customer type, geographic region, product type or sales price range), 
then it may need to consult legal counsel to determine whether these practices 
affect the determination of whether the arrangement is legally enforceable.
It may be advisable for an entity to document its conclusions about its 
evaluation of legal enforceability for each arrangement. Depending on 
the circumstances, it may also be appropriate for an entity to develop 
documentation for a particular customer or class of customer, or by jurisdiction.

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1 Step 1 – Identify the contract with a customer | 11
1.1 Criteria to determine whether a contract exists
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