Revenue – ifrs 15 handbook

Milestone method may not depict pattern of performance
If control transfers to the customer over time, then the measure of progress 
should reflect this. Although the standard lists milestones as an example of 
a possible measure of progress when using an output method, it remains 
necessary to consider whether milestones faithfully depict performance, 
particularly if the milestones are widely spaced. This is because control 
generally transfers continuously as the entity performs, rather than at discrete 
points in time. Normally, a milestone method would need to incorporate a 
measure of progress between milestone achievements to faithfully depict an 
entity’s performance. 
Work in progress for an over-time performance obligation is generally expensed 
as a fulfilment cost when it is incurred because control of the work in progress 
transfers to the customer as it is produced and not at discrete intervals. 
However, inventory to support multiple contracts that has an alternative use is 
recognised as an asset until it is dedicated to a specific contract – e.g. by being 
integrated into the production process.
A performance obligation may be partially satisfied before the 
contract is identified 
IFRS 15.2, 9, 95, 99, BC48
Entities sometimes start to perform before: 
– entering into a contract with a customer; or 
– the contract with the customer meets the Step 1 criteria (e.g. collectability is 
not probable). 
In these cases, if the work completed to date has no alternative use and the 
performance obligation meets the criteria for revenue to be recognised over 
time, then the entity recognises a cumulative catch-up adjustment at the date 
on which the Step 1 criteria are met. This is because under the standard an 
entity recognises revenue based on progress towards complete satisfaction 
of the performance obligation. Therefore, because the entity has already