Revenue – ifrs 15 handbook

1.1
Criteria to determine whether a contract exists
IFRS 15.10
The standard defines a ‘contract’ as an agreement between two or more parties 
that creates enforceable rights and obligations and specifies that enforceability is 
a matter of law. Contracts can be written, oral or implied by an entity’s customary 
business practices. 
IFRS 15.12
A contract does not exist when each party has the unilateral right to terminate a 
wholly unperformed contract without compensation.
IFRS 15.9
A contract with a customer is in the scope of the standard when it is legally 
enforceable and meets all of the following criteria.
... collection of
consideration is
probable
... it has commercial
substance
... it is approved
and the parties are
committed to
their obligations
... rights to goods
services and
or
payment terms can
be identified
A contract
exists if...

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4 | Revenue – IFRS 15 handbook
IFRS 15.9(e)
In making the collectability assessment, an entity considers the customer’s ability 
and intention (which includes assessing its credit-worthiness) to pay the amount of 
consideration when it is due. This assessment is made after taking into account any 
price concessions that the entity may offer to the customer (see 
Section 3.1
).
IFRS 15.14
If the criteria are not initially met, then an entity continually reassesses the contract 
against them and applies the requirements of the standard to the contract from the 
date on which the criteria are met. Any consideration received for a contract that 
does not meet the criteria is accounted for under the requirements in 
Section 1.3
.
IFRS 15.13
If a contract meets all of the criteria at contract inception, then an entity does not 
reassess the criteria unless there is an indication of a significant change in the facts 
and circumstances. If on reassessment an entity determines that the criteria are no 
longer met, then it ceases to apply the standard to the contract from that date, but 
does not reverse any revenue previously recognised.