Revenue – ifrs 15 handbook

Example 13 – Technology company: Set-up activities vs 
implementation services
Company S enters into a contract to provide Customer C with a licence to its 
hosted software for three years.
As part of the contract and before commencement of the licence term, S 
creates C’s user interface so that C can access the software. S also agrees to 
convert and migrate C’s data to the new software. 
S evaluates each of these activities and concludes that: 
– creating the user interface is a set-up activity rather than a promised service 
to C, because it provides no incremental benefit to C beyond permitting C to 
access and use the software; and 
– the data conversion and migration activities are services that give C 
incremental benefits beyond the ability to access and use the software. The 
data conversion and migration activities that S performs would otherwise 
need to be performed by C or another service provider. Therefore, S 
determines that the data conversion and migration activities represent a 
service to C and assesses whether they represent a separate performance 
obligation from the ongoing hosting services.

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2 Step 2 – Identify the performance obligations in the contract | 39
2.3 Series of distinct goods or services
| 
Example 14 – Telco: Activation fee in a wireless contract
Telco T charges a one-time activation fee of 25 to Customer C when C enters 
into a wireless contract for a voice and data plan. The activation of a new 
wireless customer to the network requires various tasks, including setting up 
the wireless service, processing C in the billing system and credit checks. 
T determines that activation activities are administrative in nature and therefore 
do not constitute a separate promise to C to be assessed as a separate 
performance obligation. Because the activation fee is charged at contract 
inception and is not refundable, T applies the guidance on non-refundable up-
front fees (see 
Section 10.6
).