Revenue – ifrs 15 handbook

Factor
Rationale
No legal 
requirement
In this example, there is no law that requires L to make 
a promise for the lifetime of the product. Therefore, 
this factor suggests that the warranty is a separate 
performance obligation.
Longer 
coverage 
period
In this example, the length of the warranty is for the life of 
the suitcase, as compared with other manufacturers that 
offer warranties for a specific period. Therefore, this factor 
suggests that the warranty is a separate performance 
obligation.
Promises 
beyond agreed 
specifications
In this example, the nature of the tasks not only includes 
repairing or replacing a suitcase that does not meet the 
promised specifications, but also includes repairing 
damage that occurs after the customer obtains control 
of a suitcase. Therefore, the warranty goes beyond 
the promise that the suitcase complies with agreed 
specifications, which suggests that the warranty is a 
separate performance obligation.
Based on its analysis, L concludes that the lifetime warranty is a service in 
addition to the assurance that the product complies with agreed specifications. 
It therefore accounts for the service as a separate performance obligation.
‘Reasonably account’ threshold is undefined
The standard requires an entity that cannot reasonably account for a service-
type warranty and an assurance-type warranty separately to account for 
them together as a single performance obligation. Because the ‘reasonably 
account’ threshold is not defined in the standard, entities will need to exercise 
judgement in applying this guidance.
Length of the warranty period is an indicator of the type of 
warranty, but is not always determinative
IFRS 15.B31
The standard lists the length of the warranty period as a factor to consider 
when assessing whether the warranty provides a customer with a service. 
However, it is only one of the factors. An entity usually considers the length 
of the warranty in the context of the specific market, including geography and 
product line. In addition to the length of the warranty period, the nature of costs 
incurred in performing the warranty work may provide evidence of the nature of 
the warranty promise.

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244 | Revenue – IFRS 15 handbook