Revenue – ifrs 15 handbook

Is contract modification
?
approved
Do not account for contract
modification until
approved
IFRS 15.20
A contract modification is treated as a separate contract (prospective treatment) if it 
results in: 
– a promise to deliver additional goods or services that are distinct (see 
Section 2.1
); and 
– an increase in the price of the contract by an amount of consideration that 
reflects the entity’s stand-alone selling price for those goods or services adjusted 
to reflect the circumstances of the contract.
IFRS 15.21
If these criteria are not met, then the entity’s accounting for the modification is 
based on whether the remaining goods or services under the modified contract 
are distinct from those goods or services transferred to the customer before the 
modification.
If they are distinct, then the entity accounts for the modification as if it were a 
termination of the existing contract and the creation of a new contract. In this case, 
the entity does not reallocate the change in the transaction price to performance 
obligations that are completely or partially satisfied on or before the date of the 
contract modification. Instead, it accounts for the modification prospectively and the 
amount of consideration allocated to the remaining performance obligations (or to 
the remaining distinct goods or services in a series treated as a single performance 
obligation) is equal to the:
– consideration included in the estimate of the transaction price of the original 
contract that has not been recognised as revenue; plus or minus the
– increase or decrease in the consideration promised by the contract modification.
If the modification to the contract does not add distinct goods or services, then 
the entity accounts for it on a combined basis with the original contract, as if the 
additional goods or services were part of the initial contract – i.e. as a cumulative 
catch-up adjustment. The modification is recognised as either an increase or 
reduction in revenue at the date of the modification.

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200 | Revenue – IFRS 15 handbook
IFRS 15.90
If the transaction price changes after a contract modification, then an entity applies 
the guidance on changes in the transaction price (see 
Section 4.3
).
The following table provides examples of contract modifications, as well as how to 
account for these modifications.