Revenue – ifrs 15 handbook

Item
Measurement
Revenue
Measured at the gross transaction price, less the expected 
level of returns calculated using the guidance on estimating 
variable consideration and the constraint (see 
Section 3.1
)
Refund 
liability
Measured at the expected level of returns – i.e. the difference 
between the cash or receivable amount and the revenue as 
measured above
The nature of such a refund liability is different from contract 
liabilities and therefore it is not presented as such
Return 
asset
Measured with reference to the carrying amount of the 
products expected to be returned less the expected recovery 
costs, including potential decreases in the value to the entity 
of returned products
The nature of this return asset is different from trade and 
other receivables and therefore it is not presented as such
Cost of 
goods sold
Measured as the carrying amount of the products sold less 
the return asset as measured above
Reduction 
of inventory
Measured as the carrying amount of the products transferred 
to the customer
IFRS 15.B24–B25
The entity updates its measurement of the refund liability and return asset at each 
reporting date for changes in expectations about the amount of the refunds. It 
recognises adjustments to the:
– refund liability as revenue; and
– return asset as an expense.
Example 1 – Sale with a right of return
Retailer B sells 100 products at a price of 100 each and receives a 
payment of 10,000. The sales contract allows the customer to return any 
undamaged products within 30 days and receive a full refund in cash. The 
cost of each product is 60. B estimates that three products will be returned 
and a subsequent change in the estimate will not result in a significant 
revenue reversal. 
B estimates that the costs of recovering the products will not be significant and 
expects that the products can be resold at a profit. 
Within 30 days, two products are returned.

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236 | Revenue – IFRS 15 handbook
B records the following entries on: 
– transfer of the products to the customer to reflect its expectation that three 
products will be returned; 
– return of the two products; and
– expiry of the right to return products.
Debit
Credit
Sale
Cash
10,000
Refund liability
300
1
Revenue
9,700
To recognise sale excluding revenue on products 
expected to be returned
Return asset
180
2
Cost of sales
5,820
Inventory
6,000
To recognise cost of sales and right to recover 
products from customers