Revenue – ifrs 15 handbook

Example 12 – Implied performance obligation: Pre- and post-sale 
incentives
Carmaker N has a historical practice of offering free maintenance services 
– e.g. oil changes and tyre rotation – for two years to the end customers of 
dealers who buy its vehicles. However, the two years’ free maintenance is not 
explicitly stated in the contract with its dealers, but it is typically stated in N’s 
advertisements for the vehicles.
Therefore, the maintenance is treated as a separate performance obligation 
in the sale of the vehicle to the dealer. Revenue from the sale of the vehicle is 
recognised when control of the vehicle is transferred to the dealer. Revenue 
from the maintenance services is recognised as the maintenance services are 
provided to the retail customer.

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38 | Revenue – IFRS 15 handbook
IFRS 15.IE64–IE65
However, if N did not have a customary business practice of offering free 
maintenance, and instead announced a maintenance programme as a limited-
period sales incentive after control of the vehicle has transferred to the dealer, 
then the free maintenance would not be a separate performance obligation in 
the sale of the vehicle to the dealer.
In this case, N would recognise the full amount of revenue when control of the 
vehicle was transferred to the dealer. If N subsequently created an obligation 
by announcing that it would provide incentives, then N would accrue as an 
expense its expected cost of providing maintenance services on the vehicles 
in the distribution channel – i.e. controlled by dealers – when the programme 
was announced.
Determining whether a sales incentive to end customers was offered before 
or after sale to the dealer will be challenging for some entities, especially for 
implied sales incentives in which the entity has a customary business practice 
of offering incentives or does so on a seasonal basis. The entity will need to 
assess whether the dealer and customer have a valid expectation that the entity 
will provide a free service.