Revenue – ifrs 15 handbook

PO1
PO2
PO3
Total
Revenue allocated
80
100
120
300
Percentage of 
completion
60%
50%
30%
Revenue recognised
48
50
36
134
Invoiced amounts 
allocated
1
32
40
48
120
Contract asset (liability)
16
10
(12)
14
Note
1. In this example, the invoiced amounts are allocated based on the stand-alone selling 
price of each separate performance obligation, consistently with the allocation of 
revenue.
M expects to recover 95% of its trade receivables and contract asset.
We believe that M should assess its contract asset for impairment at the 
contract level and recognise an impairment loss of 0.7 (14 - 14 × 95%) because 
the net contract asset of 14 best represents M’s real exposure to L.
Example 4 – Current vs non-current classification: Contract assets: 
Telco
IAS 1.61
Telco T enters into a contract with Customer C to provide a handset and 
24 months of service. The contract term is 24 months because of significant 
penalties that are due on cancellation. Under the contract, C pays 200 up-front 
on receiving the handset and 70 at the end of each month. The stand-alone 
selling prices of the handset and monthly services are 600 and 65 respectively. 
T allocates 522 to the handset and 56.58 per month to the services. 
On delivering the handset, T recognises a contract asset of 322 (522 - 200). 
Of that amount, 161 (322 / 24 × 12) will be collected within 12 months and the 
remaining 161 (322 - 161) will be collected after 12 months. 

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306 | Revenue – IFRS 15 handbook
T notes that its contracts with customers are generally of 24 months. Therefore, 
it concludes that its operating cycle is 24 months. As such, T classifies the entire 
amount of the contract asset of 322 as a current item. T also discloses amounts 
that are expected to be recovered after 12 months in accordance with the 
requirements in the presentation standard.
Modifying the fact pattern, if T’s contracts within the same business were of 
different duration and it defaults to the 12-month operating cycle, then it would 
look at the nature of the contract asset. It may determine that it is similar to a 
trade receivable and therefore the amount would be split into a current and non-
current portion. The non-current portion would subsequently be reclassified into 
current when it is due within 12 months.