Revenue – ifrs 15 handbook

Example 3 – Airline expects ticket breakage and can estimate it 
reliably
Airline B sells 100 non-refundable, flexible tickets for a flight from London to 
Melbourne. The price of each ticket is 1,000. If a customer does not fly on the 
scheduled flight date, then it can reschedule the flight within 12 months at no 
additional charge. B’s historical data indicates that:
– 5% of customers purchasing tickets with similar terms do not fly on the 
scheduled flight date;
– 20% of these customers (i.e. 1% of total sales) book an alternative flight 
within the 12-month period; and
– 80% of these customers (i.e. 4% of total sales) never exercise their rights 
before expiry.
Based on this historical data, B estimates that for these 100 tickets 
95 customers will fly on the scheduled date, one will reschedule the flight 
and four will not take their flight – i.e. the estimated breakage is 4,000 (4% × 
(100 × 1,000)).
B can reasonably estimate the amount of breakage expected and it is highly 
probable that including the amount in the transaction price will not result in 
a significant revenue reversal. Therefore, B recognises the estimated ticket 
breakage of 4,000 in proportion to the pattern of exercise of the rights by the 
customers as follows.
– On the date of the flight: 3,958 ((95 × 1,000) / (96 × 1,000) × 4,000).
– When one customer takes the rescheduled flight: 42 (4,000 - 3,958).

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288 | Revenue – IFRS 15 handbook
Constraint applies even though consideration amount is known
If an entity does not have a basis for estimating breakage – i.e. the estimate is 
fully constrained – then it recognises the breakage as revenue only when the 
likelihood becomes remote that the customer will exercise its rights.
When the entity concludes that it is able to determine the amount of breakage 
to which it expects to be entitled, it estimates the breakage. To determine 
the breakage amount, the entity assesses whether it is highly probable that 
including revenue for the unexercised rights in the transaction price will not 
result in a significant revenue reversal. Applying the guidance on the constraint 
in this context is unique – the amount of consideration is known and has 
already been received, but there is uncertainty over whether and when the 
customer will redeem the amount paid by requiring the entity to transfer goods 
or services in the future. Conversely, in other situations to which the constraint 
applies – e.g. variable consideration – the total amount of consideration 
is unknown.