Revenue – ifrs 15 handbook

Product
Average 
residual 
selling price
Ratio
Price 
allocation Calculation
Licence S
40,000
40%
30,000 (75,000 × 40%)
Licence T
60,000
60%
45,000 (75,000 × 60%)
Total
100,000
100%
75,000
The residual approach is an estimation technique, not an 
allocation method
IFRS 15.BC271
The residual approach is a technique to estimate the stand-alone selling price of 
a good or service, rather than an allocation method. Therefore, the timing of the 
transfer of control of each performance obligation is not relevant when applying 
the residual approach to estimate the stand-alone selling price of a promised 
good or service. In some cases, it may be appropriate to use a residual method 
to estimate the stand-alone selling price of an item that is transferred on 
contract commencement; in other cases, it may be appropriate to use a residual 
method to estimate the stand-alone selling price of an item that is transferred 
later in the contract.
In contracts for intellectual property or other intangible products, 
a residual approach may be appropriate for determining a stand-
alone selling price
Determining stand-alone selling prices may be particularly challenging for 
contracts for intellectual property (IP) or intangible assets if they are infrequently 
sold separately but are often sold in a wide range of differently priced bundles. 
They often have little or no incremental cost to the entity providing those 
goods or services to a customer (so a cost plus a margin approach would be 
inappropriate) and may not have substantially similar market equivalents from 
which to derive a market assessment. 
In these circumstances, the residual approach may be the most appropriate 
approach for estimating the stand-alone selling price.

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98 | Revenue – IFRS 15 handbook