Revenue – ifrs 15 handbook

Example 16 – Distinct service periods within a long-term service 
contract
Cable Company R enters into a two-year service contract with Customer 
M to provide cable television service for a fixed fee of 100 per month. R has 
concluded that its cable television service is satisfied over time because M 
consumes and receives the benefit from the service as it is provided – e.g. 
customers generally benefit from each day that they have access to R’s service.

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2 Step 2 – Identify the performance obligations in the contract | 41
2.3 Series of distinct goods or services
| 
R determines that each increment of its service – e.g. day or month – is distinct 
because M benefits from that period of service on its own. Additionally, each 
increment of service is separately identifiable from those preceding and 
following it – i.e. one service period does not significantly affect, modify or 
customise another. However, R concludes that its contract with M is a single 
performance obligation to provide two years of cable television service because 
each of the distinct increments of service is satisfied over time. Also, R uses the 
same measure of progress to recognise revenue on its cable television service 
regardless of the contract’s time period.
No exemption from applying the series guidance
If the series guidance requirements are met for a good or service, then that 
series is treated as a single performance obligation (i.e. the series guidance is 
not optional).
Accounting for a series is intended to provide a simplification of 
the model
IFRS 15.BC113–BC114
The Board believes that accounting for a series of distinct goods or services 
as a single performance obligation if they are substantially the same and meet 
certain criteria generally simplifies application of the model and promotes 
consistency in identifying performance obligations in a repetitive service 
arrangement. For example, without the guidance on series of goods or services, 
an entity may need to allocate consideration to each hour or day of service in a 
cleaning service contract. 
The Board also gave transaction processing and the delivery of electricity as 
examples of a series of goods or services.
However, in some cases applying the series guidance may complicate 
application of the model. For example, this may be the case for common 
transactions in certain industries (e.g. aerospace and defence) and other types 
of transactions that involve producing a relatively small number of products 
that meet the series guidance. For this reason, some stakeholders requested 
amendments to the standard to make application of the series guidance 
optional. The Board declined to do so and reiterated that this guidance is 
not optional.
IFRS 15.BC115
However, if the contract is modified then the entity considers the distinct goods 
or services, rather than the performance obligation. This in turn simplifies the 
accounting for the contract modification (see 
Chapter 8
).

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42 | Revenue – IFRS 15 handbook