Revenue – ifrs 15 handbook

10.4.2 
Practical alternative for similar goods or services
IFRS 15.B43
If the goods or services that the customer has a material right to acquire are similar 
to the original goods or services in the contract – e.g. when the customer has an 
option to renew the contract – then an entity may allocate the transaction price to 
the optional goods or services with reference to the goods or services expected to 
be provided and the corresponding consideration expected to be received.
Example 8 – Applying the practical alternative
Company B enters into a contract with Customer C to transfer two units of 
Product P for 2,000 (1,000 per unit, which is the stand-alone selling price) 
with an option to purchase up to two more units of P at 500 per unit (i.e. 50% 
discount). B concludes that each unit of P is distinct and satisfied at a point 
in time.

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10 Other application issues | 275
10.4 Customer options for additional goods or services
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B concludes that the option for up to two additional units of P is a material right 
because the discount is incremental to discounts provided to other customers 
in this class of customers and does not exist independently from the current 
contract. B also concludes that the stand-alone selling price for the two 
additional units of P is 1,000.
The options allow C to acquire additional units of P, which are the same as the 
goods purchased in the original contract, and the purchases would be made 
in accordance with the original terms of the contract; therefore, B uses the 
alternative approach to allocate the transaction price to the options. 
B expects that there is a high likelihood of the customer exercising each option 
because of the significant discount provided. As such, B does not expect 
breakage and includes all of the options in the expected number of goods that it 
expects to provide. Therefore, B allocates the expected transaction price to the 
units expected to be transferred.
Expected transaction 
price
3,000 2,000 (price of original 2 units 
purchased) + 500 (price of third unit) 
+ 500 (price of fourth unit)
Number of units 
expected to be 
transferred
4 2 original units purchased + option for 
1 unit + option for 1 unit
Price allocated to each 
unit
750 3,000 / 4 units
Therefore, in effect 1,500 of the total consideration in the original contract of 
2,000 is allocated to the purchase of the original two units and the remaining 
500 is allocated to the two options.