Revenue – ifrs 15 handbook

Example 5 – Dealer commission with claw-back provision
Telco E enters into a month-to-month wireless contract with Customer C that 
includes voice and data services. The contract is obtained through Dealer 
D, who is entitled to a commission of 20 from E. The commission is paid on 
contract commencement but is clawed back and refunded to E if C cancels the 
service within the first three months. 
E concludes that D has completed its obligation, which is to sign C up for 
the service, even though C must continue to receive the service until the 
end of Month 3 for the commission to be fully earned. D’s commission is an 
incremental cost to obtain the contract with C. Therefore, E recognises the 
commission of 20 as an asset at contract inception, subject to recoverability. For 
discussion of the amortisation period, see 
Section 7.3
.
E assesses the contract cost asset for impairment together with its right to a 
refund on the commission paid to D.

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7 Contract costs | 179
7.2 Costs of fulfilling a contract
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Example 6 – Commission plan with tiered thresholds: Cumulative 
effect
Company B has a commission plan whereby once a cumulative threshold based 
on a number of contracts is reached, a commission is paid as a percentage of 
the cumulative value of that contract and the preceding contracts, taking into 
account any commission already paid.
Number of contracts
Commission
1–10 contracts
1% of value of contracts
11–20 contracts
4% of value of contracts 1–20
21+ contracts
7% of value of contracts 1–21+
As contracts 1–10 are obtained, B owes the salesperson only 1% of the contract 
value, which would be the minimum incremental cost of obtaining each of 
those contracts. In addition, B assesses whether it needs to accrue additional 
commissions related to those contracts that may become payable if other 
expected contracts are obtained. B also capitalises those additional amounts 
as incremental costs of obtaining customer contracts, if the one-year practical 
expedient does not apply or has not been elected.
Assume that B initially accrues 1% when it enters into Contracts 1–4. However, 
by the time B enters into Contract 5 it expects that it will enter into at least 
11 contracts. At that point, B adjusts its expectations and on entering into 
Contract 5 capitalises a 4% commission related to Contract 5 and an additional 
3% commission related to Contracts 1–4 because 1% was already capitalised.