Revenue – ifrs 15 handbook

Volume discounts or rebates may be variable consideration or 
may convey a material right
Different structures of discounts and rebates may have a different effect on the 
transaction price. For example, some agreements provide a discount or rebate 
that applies to all purchases made under the agreement – i.e. the discount or 
rebate applies on a retrospective basis once a volume threshold is met. In other 
cases, the discounted purchase price may apply only to future purchases once a 
minimum volume threshold has been met. 
If a discount applies retrospectively to all purchases under the contract once the 
threshold is achieved, then the discount represents variable consideration. In 
this case, the entity estimates the volumes to be purchased and the resulting 
discount in determining the transaction price and updates that estimate 
throughout the term of the contract.
However, if a tiered pricing structure provides discounts for future purchases 
only after volume thresholds are met, then the entity evaluates the arrangement 
to determine whether the arrangement conveys a material right to the customer 
(see 
Section 10.4
). If a material right exists, then this is a separate performance 
obligation, to which the entity allocates a portion of the transaction price. If a 
material right does not exist, then there are no accounting implications for the 
transactions completed before the volume threshold is met and purchases after 
the threshold has been met are accounted for at the discounted price.
A transaction price denominated in a foreign currency does not 
constitute variable consideration
IFRS 15.68
When a contract is denominated in a foreign currency, changes in exchange 
rates may affect the amount of revenue recognised by an entity when it is 
measured in the entity’s functional currency. However, this does not constitute 
variable consideration for the purpose of applying the standard because the 
variability relates to the form of the consideration (i.e. the currency) and not to 
other factors.
Instead, an entity applies the guidance on foreign currency transactions 
and translation to assess whether and, if so, how to translate balances and 
transactions denominated in a foreign currency.

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52 | Revenue – IFRS 15 handbook