Revenue – ifrs 15 handbook

 
Additional application examples
Example 9A – Applying the practical alternative: Contract-by-
contract basis
ABC Corp enters into 100 contracts to provide equipment for 10,000 and one 
year of maintenance for 2,000 – both prices are equal to their stand-alone 
selling price. Each contract provides the customer with the option to renew the 
maintenance for two additional years for 1,000 per year.
ABC concludes that:
– the equipment and maintenance are separate performance obligations; and
– each renewal option provides a material right that the customer would not 
receive without entering into the contract because the discount is significant 
compared with what ABC charges other similar customers.

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10 Other application issues | 277
10.4 Customer options for additional goods or services
| 
ABC does not expect the rights to go unexercised. Although it has experience 
with similar customers and has data that suggests there will be some breakage, 
historical evidence suggests that on a customer-by-customer basis neither 
of the options will expire unexercised. ABC therefore allocates the expected 
transaction price to the renewal options expected to be exercised.
Performance 
obligation
Contract 
price
Expected 
consider-
ation
Stand-
alone 
selling 
price
Selling 
price 
ratio
Price 
allocation
Equipment
10,000
10,000
10,000
62.5%
8,750
Maintenance 
Year 1
2,000
2,000
2,000
12.5%
1,750
Renewal 
option 1
1,000
1,000
2,000
12.5%
1,750
Renewal 
option 2
1,000
1,000
2,000
12.5%
1,750