Revenue – ifrs 15 handbook

Period
Receivable 
– beginning 
of month
Monthly 
payment 
– end of 
month
Interest 
income 
at 0.81% 
(monthly rate – 
9.7% 
/
 12)
Receivable 
– end of 
month
A
B
A × 0.81% = C
A - B + C
1
2,000,000
92,000
16,143
1,924,143
2
1,924,143
92,000
15,531
1,847,674
3
1,847,674
92,000
14,913
1,770,587
4
1,770,587
92,000
14,291
1,692,878
5
1,692,878
92,000
13,664
1,614,542
Continue for each period…
24
91,263
92,000
737
-
If, in this example, the implied interest rate of 9.7% were determined to be 
a below-market rate, then the transaction price would be adjusted to reflect 
a market rate, based on C’s credit-worthiness. The difference between the 
implied interest rate and the market rate would represent a discount granted to 
the customer for purposes other than financing. For an illustration of a scenario 
with an above-market rate, see 
Example 15
 in this chapter.

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70 | Revenue – IFRS 15 handbook
Assessment is undertaken at the individual contract level
IFRS 15.BC234
An entity determines the significance of the financing component at an 
individual contract level, rather than at a portfolio level. The individual contract 
level for a particular customer could consist of more than one contract if 
the contract combination criteria in the standard are met. In developing the 
standard, the International Accounting Standards Board (the Board) noted that 
it would be unduly burdensome to require an entity to account for a financing 
component if the effects of the financing component are not material to the 
individual contract but the combined effects for a portfolio of similar contracts 
would be material to the entity as a whole. An entity should apply judgement in 
evaluating whether a financing component is significant to the contract.