Revenue – ifrs 15 handbook

Applying Criterion 2 requires an entity to assess whether there 
is a transformative relationship between the two items being 
analysed
IFRS 15.BC116K
The International Accounting Standards Board (the Board) noted that the 
evaluation of whether an entity’s promise to transfer a good or service is 
separately identifiable from other promises in the contract considers the 
relationship between the various goods or services in the contract in the 
context of the process of fulfilling the contract. An entity considers the level of 
integration, inter-relation or interdependence among promises to transfer goods 
or services in evaluating whether the goods or services are distinct.
The Board also observed that an entity does not merely evaluate whether 
one item, by its nature, depends on the other (i.e. whether the items have 
a functional relationship). Instead, an entity evaluates whether there is a 
transformative relationship between the two items in the process of fulfilling 
the contract.
Separability of risks considered in determining whether goods or 
services are separately identifiable
IFRS 15.BC105, BC116J–BC116K, IU 03-18
In evaluating whether goods or services are separately identifiable, an entity 
considers whether the risks that it assumes to fulfil its obligations to transfer 
goods or services are inseparable. 
The IFRS Interpretations Committee discussed a scenario in which an entity 
enters into a contract with a customer to transfer a plot of land and to construct 
a building on that plot of land. The Committee noted that in determining 
whether there is a significant service of integrating the land and the building 
into a combined output, an entity considers whether the risks that it assumes 
in transferring the land to the customer are inseparable from the risks that it 
assumes in constructing the building – i.e. whether its performance would be 
any different if it did not also transfer the land and vice versa.
The Committee also noted that in determining whether the land and the building 
are highly interdependent or highly inter-related, the entity considers whether it 
would be able to fulfil its promise to transfer the land even if it did not construct 
the building and whether it would be able to fulfil its promise to construct the 
building even if it did not transfer the land.
The Committee observed that an entity’s promise to transfer the land would be 
separately identifiable from its promise to construct the building if: 
– its performance in constructing the building would be the same regardless of 
whether it transferred the land; and
– it would be able to fulfil each promise without fulfilling the other. 

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30 | Revenue – IFRS 15 handbook