Revenue – ifrs 15 handbook

No detailed guidance on identifying inefficiencies and wasted 
materials
IFRS 15.BC176–BC178
Generally, some level of inefficiency, rework or overrun is assumed in a service 
or construction contract and an entity contemplates these in the arrangement 
fee. Although the standard specifies that unexpected amounts of wasted 
materials, labour or other resources should be excluded from a cost-to-cost 
measure of progress, it does not provide additional guidance on how to identify 
unexpected costs. Judgement is therefore required to distinguish normal 
wasted materials or inefficiencies from those that do not depict progress 
towards completion.
5.3.4 
As-invoiced practical expedient
IFRS 15.B16
As a practical expedient, if an entity has a right to invoice a customer at an amount 
that corresponds directly with its performance to date, then it can recognise 
revenue at that amount. For example, in a services contract an entity may have the 
right to bill a fixed amount for each unit of service provided.
Example 16 – Applying ‘as-invoiced’ practical expedient: Cleaning 
services
Cleaning Firm F enters into a contract with Customer C to provide cleaning 
services for two years. Fees for the services are based on a fixed hourly rate 
F could elect to apply the as-invoiced practical expedient because during the 
contract term it has a right to invoice the customer based on its performance to 
date – i.e. the number of hours of cleaning services provided to date.
Consideration does not need to be a fixed amount per unit to 
recognise revenue at the amount that the entity has a right to 
invoice
The as-invoiced practical expedient can apply when the price per unit changes 
during the contract. The practical expedient is appropriate when the amount 
invoiced for goods or services reasonably represents the value to the customer 
of the entity’s performance completed to date.
This can be illustrated using the following examples. 
– 
A contract to purchase electricity at prices that change each year based on 
the observable forward market price of electricity:
such a contract qualifies 
for the practical expedient if the rates per unit reflect the value of the 
provision of those units to the customer.

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144 | Revenue – IFRS 15 handbook
– 
An IT outsourcing arrangement with a declining unit price that reflects 
decreasing levels of effort to complete the tasks: 
this may be the case 
because underlying activities performed at the outset of the contract are 
more complex, requiring more experienced (i.e. more costly) personnel than 
later activities. There may also be the effect of a learning curve – i.e. in most 
circumstances, personnel will become more efficient at performing the 
same tasks over time. 
Additionally, the following considerations are relevant when assessing whether 
the as-invoiced practical expedient can be applied when the price per unit 
changes during the contract: 
– 
whether the reasons for the change in the price per unit are substantive:
e.g. 
for a valid business reason, such as declining costs or changes in the relevant 
price index; and
– 
whether the amount of the change approximates the change in value to 
the customer:
e.g. by the change in a forward pricing curve in the case of 
electricity, a change in the consumer price index (CPI) or a change in labour 
data that is relevant to the entity’s costs of providing the goods or services.