Revenue – ifrs 15 handbook

Arrangements that include a contractual minimum
It may be unclear whether the as-invoiced practical expedient can be applied 
when there is a contractual minimum in an arrangement. This is because 
in some cases the price that an entity invoices per unit may not directly 
correspond with the value to the customer. 
In general, a contractual minimum amount that the entity expects the customer 
to easily surpass is not considered a substantive minimum and does not 
preclude the use of the as-invoiced practical expedient. This is because the 
contractual minimum will not affect the price per unit invoiced because it is 
expected to be exceeded.
In contrast, if the contractual minimum is such that there is a reasonable 
possibility that the customer will not exceed that minimum, then the practical 
expedient does not apply. Instead, the general guidance on determining the 
transaction price (including the constraint on variable consideration) applies 
and the entity needs to select an appropriate measure of progress for that 
performance obligation. This is because when the contractual minimum is not 
exceeded, the entity will need to estimate the total number of transactions 
and continuously update that amount in order to apply an output method that 
depicts progress.

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5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 145
5.3 Measuring progress towards complete satisfaction of a performance obligation
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Practical expedient may not be available when a contract includes 
a significant up-front fee 
The practical expedient is designed to apply when the transaction price varies 
in direct proportion to a variable quantity of goods or services transferred to the 
customer – i.e. when the transaction price = a fixed per-unit price × a variable 
quantity of units (TP = P × Q). In general, when significant fees are paid up-
front, the amount invoiced typically does not correspond directly with the value 
to the customer of each incremental good or service that the entity transfers to 
the customer and therefore the practical expedient cannot be applied. 
In contrast, an up-front fee that reflects the value of other distinct goods or 
services transferred to the customer up-front would not preclude the use of the 
practical expedient.