Revenue – ifrs 15 handbook

Certain sales agent arrangements may be over-time
Generally, when the entity is acting as a sales agent for a customer the entity 
satisfies its promise at a point in time. This is because the activities performed 
by the agent before sale typically do not transfer a good or service to a 
customer. If the customer receives any benefit from the entity’s activities, then 
that benefit is limited unless the sale is completed.
However, there may be sales agent arrangements that provide benefits to 
the customer over time before a sale is completed. For example, assume that 
an entity receives a significant non-refundable fee at the time of listing and a 
relatively smaller commission fee when a sale is completed. The large non-
refundable up-front fee indicates that the entity is providing the customer with a 
listing service and the customer is benefiting from that service over time. In this 
example, the entity estimates the commission fee following the guidance on 
variable consideration. 
Judgement and evaluation of the facts will be necessary to determine whether 
a good or service is being transferred before the sale is completed.
Measure of progress for stand-ready obligations is not always 
straight-line
IFRS 15.26(e), IE92–IE94, BC160
Judgement is required to determine an appropriate measure of progress for a 
stand-ready obligation. When making the judgement, an entity considers the 
substance of the stand-ready obligation to ensure that the measure of progress 
aligns with the nature of the underlying promise. In assessing the nature of the 
obligation, the entity considers all relevant facts and circumstances, including 
the timing of transfer of goods or services, and whether the entity’s efforts 
(i.e. costs) are expended evenly throughout the period covered by the stand-
ready obligation.
In many cases, a straight-line measure of progress will be appropriate for 
recognising revenue on a stand-ready obligation. However, a straight-line 
measure of progress is not always appropriate. 
For example, in a contract for unspecified software upgrades (a stand-ready 
obligation) or a health club contract, revenue is generally recognised on a 
straight-line basis because the pattern of benefit to the customer as well as the 
entity’s efforts to fulfil the contract are generally even throughout the period. In 
contrast, a straight-line basis of recognition would not generally be appropriate 
in an annual contract to provide snow removal services in an area where 
snowfall is highly seasonal. The pattern of benefit of these services, as well as 
the entity’s effort to fulfil the contract, would not generally be even throughout 
the year, because snow is only expected in the winter.

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136 | Revenue – IFRS 15 handbook