Revenue – ifrs 15 handbook

No guidance on the timing and pattern of the recognition of 
margin on uninstalled materials
An entity may be entitled to a margin on the uninstalled goods that is clearly 
identified in the contract terms or forms part of the overall transaction price. The 
standard does not provide guidance on the timing of recognition for this margin 
– i.e. whether it is recognised when the materials are installed or incorporated 
into the revenue recognition calculation for the remainder of the contract – or 
whether the costs are excluded when a measure of progress based on input 
costs is used.
IFRS 15.BC171
The Board believes that recognising a contract-wide profit margin before the 
goods are installed could overstate the measure of the entity’s performance 
and, therefore, revenue. However, requiring an entity to estimate a profit margin 
that is different from the contract-wide profit margin could be complex and 
could effectively create a performance obligation for goods that are not distinct 
(therefore bypassing the requirements on identifying performance obligations). 
The adjustment to the cost-to-cost measure of progress for uninstalled 
materials is generally intended to apply to a subset of goods in a construction-
type contract – i.e. only to those goods that have a significant cost relative to 
the contract and only if the entity is essentially providing a simple procurement 
service to the customer.
Judgement will be required in determining whether a customer is obtaining 
control of a good ‘significantly’ before receiving services related to the good. In 
Example 15
in this chapter, it is unclear whether the same guidance would apply 
if the lifts were expected to be installed in January 2020 instead of June 2020.

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5.3 Measuring progress towards complete satisfaction of a performance obligation
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