Revenue – ifrs 15 handbook

Up-front reconfiguration
F determines that the up-front reconfiguration costs meet the capitalisation 
criteria because they are directly related to the contract, are expected to be 
recovered and enhance the entity’s resources that will be used to satisfy the 
performance obligation – i.e. its manufacturing facility that it will use to produce 
the specialised asset for the customer. F therefore capitalises the up-front 
reconfiguration costs and amortises the asset over time consistent with the 
transfer of control of the specialised asset.
Back-end reconfiguration
F determines that the back-end reconfiguration costs cannot be capitalised 
because they do not enhance a resource that will be used to satisfy the 
performance obligation in the contract because the reconfiguration occurs after 
the specialised asset has been produced. These costs are therefore expensed 
as they are incurred. 
In this case, F determines that the latter expenses are incurred when the back-
end reconfiguration occurs. Although it is probable that F will incur the costs, 
the costs are avoidable up to the date they are incurred – i.e. F can choose 
not to reconfigure its production facility. This analysis is similar to repair and 
maintenance costs that are essential to the operation of the production facility 
but are recognised only when the repair and maintenance activities take place.
7.3 Amortisation
IFRS 15.99
An entity amortises the asset recognised for the costs to obtain and/or fulfil a 
contract on a systematic basis, consistent with the pattern of transfer of the good 
or service to which the asset relates. This can include the goods or services in an 
existing contract, as well as those to be transferred under a specific anticipated 
contract – e.g. goods or services to be provided following the renewal of an 
existing contract.