Revenue – ifrs 15 handbook

Judgement may be required to determine the point in time at 
which control transfers
IFRS 15.BC155
The indicators of transfer of control are factors that are often present if 
a customer has control of an asset; however, they are not individually 
determinative, nor are they a list of conditions that have to be met. The standard 
does not suggest that certain indicators should be weighted more heavily 
than others, nor does it establish a hierarchy that applies if only some of the 
indicators are present. However, it remains possible that in some facts and 
circumstances certain indicators will be more relevant than others and so carry 
greater weight in the analysis.
Judgement may be required to determine the point in time at which control 
transfers. This determination may be particularly challenging when there are 
indicators that control has transferred alongside ‘negative’ indicators suggesting 
that the entity has not satisfied its performance obligation.
Potential challenges may exist in determining the accounting for 
some delivery arrangements 
When evaluating at which point in time control transfers to the customer, the 
shipping terms of the arrangement are a relevant consideration. Shipping 
terms alone do not determine when control transfers – i.e. an entity considers 
them along with other indicators of control to assess when the customer has 
the ability to direct the use of, and obtain substantially all of the benefits from, 
the asset. However, shipping terms often indicate the point in time when the 
customer has legal title, the risks and rewards of ownership and a present 
obligation to pay – all of which are indicators that control has transferred. 
The Incoterms of the International Chamber of Commerce are used frequently 
in international purchase-and-sales contracts. They include standard trade 
terms such as ‘free on board’ (FOB), ‘cost, insurance and freight’ (CIF) and ‘ex 
works’ (EXW). In the case of FOB, when the goods are loaded onto the ship 
the customer usually receives the bill of lading and takes over the risk of loss or 
damage to the goods. This may indicate that the customer obtains control when 
the goods are loaded onto the ship and the bill of lading has been transferred to 
the customer. 
If control of the goods transfers to the customer before delivery to the final 
destination, then an entity considers whether the transportation service is a 
distinct performance obligation and, if so, whether it acts as a principal or an 
agent for the shipping service (see 
Section 10.3
). 

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5 Step 5 – Recognise revenue when or as the entity satisfies a performance obligation | 151
5.5 Repurchase agreements
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When goods are shipped, the risk of loss may often be transferred to a third