Revenue – ifrs 15 handbook

other criteria are met

Costs required to be 
expensed when they are 
incurred

–
Direct labour
: e.g. employee 
wages
–
Direct materials
: e.g. supplies
–
Allocation of costs that relate 
directly to the contract
: e.g. 
depreciation and amortisation
–
Costs that are explicitly 
chargeable to the customer 
under the contract
–
Other costs that were incurred 
only because the entity 
entered into the contract
: e.g. 
subcontractor costs
–
General and administrative costs
: 
unless they are explicitly chargeable 
under the contract
–
Costs that relate to satisfied (or 
partially satisfied) performance 
obligations
–
Costs of wasted materials, labour 
or other contract costs
1
–
Costs that do not clearly relate to 
unsatisfied or partially satisfied 
performance obligations
1. For the effects that these costs have on the measure of progress, see 
5.3.3
.

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7 Contract costs | 181
7.2 Costs of fulfilling a contract
| 
Example 7 – Set-up costs: Managed data centre
IFRS 15.IE192–IE196
Managed Services Company M enters into a contract to manage Customer 
Y’s IT data centre for five years, for a fixed monthly fee. Before providing the 
services, M designs and builds a technology platform to migrate and test Y’s 
data. This platform is not transferred to Y and is not considered a separate 
performance obligation. The initial costs incurred to set up the platform are 
as follows.
Design services
40
Hardware and software
210
Migration and testing
100