Revenue – ifrs 15 handbook

Requirements for repurchase agreements not applicable to 
arrangements with a guaranteed resale amount
IFRS 15.BC431
The Board observed that although the cash flows of an agreement with a 
guaranteed minimum resale value may be similar to those of an agreement with 
a put option, the customer’s ability to control the asset is different and therefore 
the recognition of revenue may differ. This is because if a customer has a 
significant economic incentive to exercise a put option, then it is restricted in 
its ability to consume, modify or sell the asset. This would not be the case if the 
entity had instead guaranteed a minimum amount of resale proceeds. 
This could result in different accounting for arrangements with similar expected 
cash flows.
Conditional forwards or call options
IFRS 15.BC424
In some cases, a forward contract or a call option may be conditional on a future 
event. Although all of the facts and circumstances need to be evaluated for 
each arrangement, treating certain conditional forwards or call options as rights 
of return (see 
Section 10.1
) may be more consistent with the economics of 
these transactions. In these cases, it is appropriate to apply the principles for 
recognising and measuring variable consideration from a right-of-return provision, 
rather than accounting for the arrangement as a lease or a financing transaction.
For example, some perishable goods manufacturers include provisions in their 
agreements with customers under which they have the right to remove and 
replace out-of-date products to ensure that the end consumers receive the 
product quality and freshness that they expect. Under these circumstances, the 
manufacturer does not have the unconditional right to repurchase the products 
at any time. The product must be past its sell-by date for the manufacturer to 
apply this right.
In this example, the existence of a conditional call option does not restrict 
the customer’s ability to direct the use of, and obtain substantially all of the 
remaining benefits from, the asset unless and until the conditional event 
occurs, because the manufacturer has no right to repurchase the product if 
the sell-by date has not passed. Consequently, the customer has control over 
the asset until the contingent event occurs. Therefore, in this example the 
manufacturer accounts for the arrangement as a sale with a right of return.

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156 | Revenue – IFRS 15 handbook