Revenue – ifrs 15 handbook

Service concession
IFRIC 12.15, 17
Company S enters into a contract with the government to build a toll bridge. 
Construction takes 30 months. On completion, S receives a right to charge 
tolls at the bridge for 10 years (i.e. it recognises an intangible asset as the 
consideration for its construction service).
S recognises a contract asset as the construction progresses and an intangible 
asset when the construction is completed and it has a right to charge the toll.
Similar to Examples 4 and 5 in this chapter, S needs to consider its operating 
cycle. If S defaults to a 12-month operating cycle, then it considers the nature of 
the asset. In this example, the nature may be similar to an intangible asset and 
therefore it may be appropriate to classify the contract asset as a non-current 
item in its entirety.
Example 7A – Current vs non-current classification: Contract 
liabilities: Full prepayment for a good that transfers at a point in 
time
Developer D enters into a contract with Customer S for a sale of a residential 
unit. The development takes three years and control over the unit transfers 
at a point in time on completion of construction. D requires S to pay the full 
contract price of 300 on entering into the contract. D recognises a contract 
liability of 300.
Similar to Examples 4–6 in this chapter, D considers its operating cycle. If it 
approximates three years, then the contract liability is classified as current.
If D defaults to a 12-month operating cycle, then there are two approaches.
Approach 1 – Operating nature
Under this approach, D determines that the nature of the contract liability is 
similar to other operating items. Therefore, it is classified as current.
Approach 2 – Long-term borrowing nature
Under this approach, D determines that the nature of the advance received 
is similar to a long-term borrowing. D classifies 300 as non-current on initial 
recognition and reclassifies the balance as current 12 months before the 
expected completion of the project and recognition of revenue.

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308 | Revenue – IFRS 15 handbook