Revenue – ifrs 15 handbook

Total
350
These set-up costs relate primarily to activities to fulfil the contract, but do not 
transfer goods or services to the customer. M accounts for them as follows.
Type of cost
Accounting treatment
Hardware
Accounted for under guidance for property, plant, 
and equipment
Software
Accounted for under guidance for internal-use 
software development/intangible assets
Design, migration and 
testing of the data 
centre
Capitalised under the standard because they: 
– relate directly to the contract
– generate or enhance resources of the entity that 
will be used to satisfy performance obligations in 
the future
– are expected to be recovered over the five-year 
contract period
The capitalised hardware and software costs are subsequently measured using 
other applicable guidance. The costs capitalised under the standard are subject 
to its amortisation and impairment requirements (see Sections 
7.3
 and 
7.4
).

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182 | Revenue – IFRS 15 handbook
Applicability of the cost capitalisation guidance in the revenue 
standard
For many contracts under which performance obligations are satisfied at a point 
in time, an entity usually accounts for the costs of satisfying these performance 
obligations under other standards – e.g. the inventory standard. This is because, 
under such contracts, an entity is often creating an asset in the scope of other 
guidance (e.g. inventory).
In contrast, when a performance obligation is satisfied over time, costs are 
typically expensed as they are incurred because control of the work in progress 
transfers continuously to the customer as it is produced and not at discrete 
intervals – i.e. there is no asset created by the entity’s performance.