Revenue – ifrs 15 handbook

Example 2 – Allocating the transaction price
Telco T enters into a 12-month phone contract in which a customer is provided 
with a handset and a plan that includes data, calls and texts (the wireless plan) 
for a price of 35 per month. T has identified the handset and the wireless plan as 
separate performance obligations. 
T sells the handset separately for a price of 200, which provides observable 
evidence of a stand-alone selling price. T also offers a 12-month service plan 
without a phone that includes the same level of data, calls and texts for a price 
of 25 per month. This pricing is used to determine the stand-alone selling price 
of the wireless plan as 300 (25 × 12 months).
T allocates the transaction price of 420 (35 × 12 months)
1
to the performance 
obligations based on their relative stand-alone selling prices as follows.
Performance 
obligation
Stand-alone 
selling 
prices
Selling 
price ratio
Price 
allocation Calculation
Handset
200
40%
168 (420 × 40%)
Wireless plan
300
60%
252 (420 × 60%)
Total
500
100%
420
Note
1. In this example, the entity does not adjust the consideration to reflect the time value 
of money. This could happen if the entity concludes that the transaction price does not 
include a significant financing component or if the entity elects to use the practical 
expedient (see 
Section 3.2
).
Allocating the transaction price may be simple if stated contract 
prices are acceptable estimates of stand-alone selling price
In some cases, an entity may determine that a stated contract price is an 
acceptable estimate of the stand-alone selling price for its performance 
obligations – e.g. if the stated contract price is within a narrow range of 
observable selling prices (see 
4.1.1
). If this is the case for all of the performance 
obligations in a contract and there is no allocation of variable consideration or 
discounts, then this will simplify allocation of the transaction price.
For example, Medical Device Company MDC sells a medical imaging device 
bundled with one year of PCS and 10 days of training to a customer for a total 
fee of 564,900. MDC determines that the medical imaging device, PCS and 
training are separate performance obligations. There is no variable consideration 
or discounts that are required to be allocated entirely to some but not all 
performance obligations. 

---

© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
100 | Revenue – IFRS 15 handbook
The stated contract prices for the goods and services are as follows.