Revenue – ifrs 15 handbook

A combination of methods may be appropriate
IFRS 15.BC202
The standard requires an entity to use the same method to measure a given 
uncertainty throughout the contract. However, if a contract is subject to more 
than one uncertainty, then an entity determines an appropriate method for each 
uncertainty. This may result in an entity using a combination of expected values 
and most likely amounts within the same contract. 
For example, a construction contract may state that the contract price will 
depend on:
– 
the price of a key material, such as steel:
this uncertainty will result in a range 
of possible consideration amounts, depending on the price of steel; and
– 
a performance bonus if the contract is finished by a specified date:
this 
uncertainty will result in two possible outcomes, depending on whether the 
target completion date is achieved.
In this case, the entity may conclude that it is appropriate to use an expected 
value method for the first uncertainty and a most likely amount method for the 
second uncertainty. Once the methods are selected, the entity cannot change 
them and needs to apply each method consistently throughout the duration of 
the contract.

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56 | Revenue – IFRS 15 handbook
 
Additional application examples
Example 5 – Estimate of variable consideration: Expected value: 
Multiple-tier rebates
Pharmaceutical Company M enters into a contract to sell to Customer F a drug 
for 10 per unit. The arrangement includes no minimum purchase quantities. At 
the end of each year, F is entitled to a rebate on its annual purchases. Based 
on M’s extensive experience with similar arrangements, it estimates the 
following outcomes.