Revenue – ifrs 15 handbook

Determining which measure of progress to apply is not a free 
choice
IFRS 15.BC159
The standard requires an entity to select a method that is consistent with the 
objective of depicting its performance. An entity therefore does not have a free 
choice of which method to apply to a given performance obligation – it needs 
to consider the nature of the good or service that it promised to transfer to 
the customer. 
The standard also provides examples of circumstances in which a particular 
method does not faithfully depict performance – e.g. it states that units-of-
production may not be an appropriate method when there is a material amount 
of work in progress. Judgement is required when identifying an appropriate 
method of measuring progress.
When evaluating which method depicts the transfer of control of a good 
or service, the entity’s ability to apply that method reliably may also be 
relevant. For example, the information required to use an output method 
may not be directly observable or may require undue cost to obtain – in these 
circumstances, an input method may be appropriate.
Single method of measuring progress is used for a performance 
obligation
IFRS 15.40
Under the standard, an entity applies a single method of measuring progress for 
each performance obligation. This may be difficult when a single performance 
obligation contains multiple promised goods or services that will be transferred 
over different periods of time. For example, this might occur when a 
performance obligation combines a licence and a service arrangement, or a sale 
of goods and design or installation services.
Significant judgement may be required in some circumstances, and 
understanding the nature of its overall promise to the customer is key for an 
entity to select a reasonable measure of progress.
If the determination of a single measure of progress is challenging, then an 
entity may need to reconsider the assessment of performance obligations 
and whether there are multiple distinct performance obligations. However, 
the fact that identifying a single measure of progress is challenging does 
not necessarily mean that the promised goods or services are not a single 
performance obligation.

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5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 135
5.3 Measuring progress towards complete satisfaction of a performance obligation
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