Revenue – ifrs 15 handbook

Example 15 – Uninstalled materials
IFRS 15.IE95–IE100
In November 2019, Contractor P enters into a lump-sum contract with 
Customer Q to refurbish a three-storey building and install new lifts for total 
consideration of 5,000. The following facts are relevant.
– The refurbishment service, including the installation of lifts, is a single 
performance obligation that is satisfied over time. 
– P is not involved in designing or manufacturing the lifts, but is acting as the 
principal. Q obtains control of the lifts when they are delivered to the site in 
December 2019. 
– The lifts are not expected to be installed until June 2020.
– P uses an input method based on costs incurred to measure its progress 
towards complete satisfaction of the performance obligation.

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142 | Revenue – IFRS 15 handbook
The transaction price and expected costs are as follows.
Transaction price
5,000
Costs
Lifts
1,500
Other costs
2,500
Total expected costs
4,000
P concludes that including the costs of procuring the lifts in the measure of 
progress would overstate the extent of its performance. Consequently, it 
adjusts its measure of progress to exclude these costs from the costs incurred 
and from the transaction price, and recognises revenue for the transfer of the 
lifts at a zero margin.
By 31 December 2019, other costs of 500 have been incurred (excluding the 
lifts) and P therefore determines that its performance is 20% complete (500 / 
2,500). Consequently, it recognises revenue of 2,200 (20% 
×
3,500
1
+ 1,500) 
and costs of 2,000 (500 + 1,500).
Note
1. Calculated as the transaction price of 5,000 less the cost of the lifts of 1,500.