Revenue – ifrs 15 handbook

in unit price linked to a fixed change
Modifying Example 17A, Law Firm L charges 500 per hour for the first year and 
then adjusts each subsequent year by an amount equal to the greater of the 
change in the CPI or 7%. The CPI is currently expected to increase at 2% for the 
upcoming year and L’s costs are not expected to increase more than the CPI. 
In this example, the price is expected to increase by 7% each year, which is 
not consistent with inflation or L’s historical pricing or cost trends. Therefore, L 
concludes that it cannot use the as-invoiced practical expedient because the 
change is not supported by valid business reasons – e.g. being commensurate 
with the increase in costs of providing the service or changes in the CPI.
Example 17C – Applying ‘as-invoiced’ practical expedient: Different 
per-unit rates within a performance obligation
Modifying Example 17A, Law Firm L charges different rates per hour over the 
contract term based on the type and experience of the professional providing 
the service.
For example, the contract provides the following rate card: 
– 750 per hour for a partner; 
– 500 per hour for a senior associate; 
– 300 per hour for an associate; and
– 100 per hour for a paralegal. 
These rates reflect observable hourly rates that L charges similar customers 
for its professional services on a stand-alone basis. Despite the legal services 
being a single performance obligation, L will bill Customer M a different hourly 
rate depending on which professional is performing the task generating 
the billing. 
L concludes that it can apply the practical expedient to recognise revenue 
because it has the right to bill at an amount that corresponds directly with its 
performance to date. The practical expedient is available despite the different 
rates because the differences reflect substantive differences between the value 
that each professional provides.

---

© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 147
5.3 Measuring progress towards complete satisfaction of a performance obligation
|