Revenue – ifrs 15 handbook

Up-front fee may need to be allocated
Even when a non-refundable up-front fee relates to a promised good or service, 
the amount of the fee may not equal the relative stand-alone selling price of that 
promised good or service; therefore, some of the non-refundable up-front fee 
needs to be allocated to other performance obligations. For further discussion 
on allocation, see 
Section 4.2
.
Deferral period for non-refundable up-front fee depends on 
whether the fee provides a material right
A non-refundable up-front fee may provide the customer with a material right 
if the fee is significant enough that it is likely to impact the customer’s decision 
on whether to reorder a product or service – e.g. to renew a membership or 
service contract, or order an additional product.
If the payment of an up-front fee results in a contract that includes a 
customer option that is a material right, then the fee is recognised over the 
period during which the customer consumes the good or service that gives 
rise to the material right. Determining that period will require significant 
judgement, because it may not align with the stated contractual term or other 
information historically maintained by the entity – e.g. the average customer 
relationship period.
When the up-front fee is not deemed to provide a material right and the cost 
amortisation period is determined to be longer than the stated contract period, 
the period over which a non-refundable up-front fee is recognised as revenue 
differs from the amortisation period for contract costs.
Consideration of whether a non-refundable up-front fee gives rise 
to a significant financing component
IFRS 15.60
An entity will need to consider whether the receipt of an up-front payment 
gives rise to a significant financing component within the contract. All relevant 
facts and circumstances will need to be evaluated, and an entity may need 
to apply significant judgement in determining whether a significant financing 
component exists (see 
Section 3.2
).