Revenue – ifrs 15 handbook

Section
Contract
costs
Costs of obtaining a contract
(see Section 7.1)
Impairment of assets
arising from costs to obtain
or fulfil a contract
(see
7.4)
Section
7.1 
Costs of obtaining a contract
IFRS 15.91–92
An entity capitalises incremental costs to obtain a contract with a customer – e.g. 
sales commissions – if it expects to recover those costs.
IFRS 15.94
However, as a practical expedient an entity is not required to capitalise the 
incremental costs to obtain a contract if the amortisation period for the asset is 
one year or less.
IFRS 15.93
Costs that will be incurred regardless of whether the contract is obtained – including 
costs that are incremental to 
trying 
to obtain a contract – are expensed as they are 
incurred, unless they meet the criteria to be capitalised as fulfilment costs (see 
Section 7.2
). An example is costs to prepare a bid, which are incurred even if the 
entity does not obtain the contract.

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174 | Revenue – IFRS 15 handbook
No
Expense costs as they
are incurred
No
Yes
Capitalise costs
Would costs be incurred
regardless of whether the
contract is obtained?
Yes
Do they meet the criteria
to be capitalised as
fulfilment costs?
Are the incremental costs
expected to be recovered?
Yes
No
Example 1 – Costs incurred to obtain a contract: Sales 
commissions to employees
IFRS 15.IE189–IE191
Consulting Company E provides consulting services to customers. Following a 
competitive tender process, E wins a contract to provide consulting services to 
Customer C. E incurs the following costs to obtain the contract.
External legal fees for due diligence
15
Travel costs to deliver proposal
25
Commissions to sales employees and related payroll taxes
10