Revenue – ifrs 15 handbook

5.2.1 
Performance does not create an asset with an alternative 
use
IFRS 15.B7
For an asset to have no alternative use to an entity, a contractual restriction on the 
ability to direct its use has to be substantive – i.e. an enforceable right. If an asset 
is largely interchangeable with other assets and could be transferred to another 
customer without breaching the contract or incurring significant incremental costs, 
then the restriction is not substantive. 
IFRS 15.B8
A practical limitation on an entity’s ability to direct an asset for another use – e.g. 
design specifications that are unique to a customer – exists if the entity would:
– incur significant costs to rework the asset; or
– be able to sell the asset only at a significant loss.
IFRS 15.36
The assessment of whether an asset has an alternative use is made at contract 
inception and is not subsequently updated, unless a contract modification 
substantially changes the performance obligation (see 
Chapter 8
).

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5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 119
5.2 Performance obligations satisfied over time
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Example 2 – Applying the guidance on alternative use
IFRS 15.IE73–IE76
Manufacturer Y enters into a contract with a customer to build a specialised 
satellite. Y builds satellites for various customers; however, the design and 
construction of each satellite differs substantially on the basis of each customer’s 
needs and the type of technology that is incorporated into the satellite.
At contract inception, Y assesses whether the satellite, in its completed state, 
will have an alternative use. Although the contract does not preclude Y from 
directing the completed satellite to another customer, Y would incur significant 
costs to rework the design and function of the satellite. In this example, the 
customer-specific design of the satellite restricts Y’s practical ability to readily 
direct the satellite to another customer. Therefore, the satellite does not have an 
alternative use to Y.