Revenue – ifrs 15 handbook

Example 19 – Applying ‘as-invoiced’ practical expedient: Up-front 
fees
Technology Company T enters into a contract with Customer C to provide C 
with access to its hosted transaction processing application for three years. 
T concludes that the software licence is not distinct from the hosting services 
and that there is a single performance obligation satisfied over time to provide 
transaction processing services. T further concludes that the licence is not 
the predominant item in the transaction because the hosting services have a 
significant value to C. Therefore, the licence-specific guidance does not apply to 
this performance obligation.
T charges C 0.90 per transaction throughout the contract period, billed quarterly. 
In addition, C is required to pay a non-refundable up-front fee of 48,000. 
T expects transaction-based fees from the arrangement of approximately 
480,000.

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148 | Revenue – IFRS 15 handbook
Judgement is needed to determine whether T can apply the ‘as-invoiced’ 
practical expedient. If T determines that the up-front fee is significant, then 
this suggests that the fees for which T has a right to invoice each period do 
not reflect the value of T’s performance for that period and that the practical 
expedient does not apply. 
If the practical expedient does not apply, then T considers whether it is 
appropriate to allocate the transaction processing fees to each period of service. 
See 
Section 4.2
.
Example 20 – Applying ‘as-invoiced’ practical expedient: Non-
substantive contractual minimum
Outsourcer Y and Customer C execute a two-year payroll processing 
arrangement in which Y processes C’s payroll each week. 
The total weekly invoice is calculated based on the number of employee 
payments processed each week. C pays 1.00 per transaction throughout the 
two years, subject to an annual minimum of 50,000. 
Y has a number of contracts similar to the one with C and relevant experience 
suggests that it will process more than 150,000 payroll transactions each year 
for C. Y includes an annual minimum requirement in its contracts to ensure 
a minimum recovery of its fixed costs if all of its customers pay only their 
contractual minima annually. 
Because Y expects to significantly exceed the annual minimum each year of the 
contract, it concludes that the annual minimum is not substantive. Therefore, 
Y concludes that the contractual minimum does not preclude use of the as-
invoiced practical expedient.