Revenue – ifrs 15 handbook

Providing a significant integration service is determinative
IFRS 15.B35A(c), BC385R
When a customer contracts for a combined output of significantly integrated 
goods or services and the entity is the party that provides the significant 
integration service, the entity is the principal for the combined output. In these 
cases, the entity controls the specified good or service (the combined output) 
before it transfers control to the customer because it controls the inputs 
necessary to perform the significant integration service.
Entity obtains only flash title before transfer to the customer
IFRS 15.B35
A ‘flash title’ scenario is common in the retail and commodity industries, in 
which a retailer or a commodity dealer does not take title to the goods or 
services until the point of sale to a customer and the end customer immediately 
takes control after that.
Although taking title may indicate that an entity can direct the use of and obtain 
substantially all of the remaining benefits of a good, it is not determinative that 
control has transferred. For example, taking title to a good only momentarily 
does not in and of itself mean that an entity controls the specified good or 
service before it is transferred to the customer. In contrast, an entity could 
control a good before obtaining title.
When an entity obtains only flash title to the specified good, the principal-
agent evaluation will focus on whether it obtains control of the specified good 
or service before obtaining flash title and a consideration of the entity’s and 
supplier’s rights before the transfer of the good to the end customer. All facts 
and circumstances will need to be considered when evaluating the control 
principle circumstances.
Entity may still be principal for tangible asset even if it does not 
take physical possession
Although physical possession is an indicator that the entity has the ability to 
direct the use of and can obtain substantially all of the remaining benefits of an 
asset, it is not determinative. 
If an entity does not take physical possession of the asset – e.g. in 
arrangements when goods are shipped directly from the supplier to the 
customer – it might still control the specified good or service when it: 
– has the ability to direct or redirect the asset for other uses (for its own use or 
to other customers);or 
– can restrict the ability of the customer or supplier to direct the use of the 
asset.

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