Revenue – ifrs 15 handbook

Example 3 – Costs incurred to obtain a contract: Sales 
commissions vs wages to sales staff
During the development of a new advisory service line of business, Bank B 
incurred the following costs. 
– External consultant and legal costs for developing a standard contract.
– Wages for sales staff who were assigned the task of signing new customers. 
– Sales commissions paid to sales staff when a customer signs a contract.
B determines that the sales commissions paid to staff are costs of obtaining 
a contract because they are payable only when the contract is secured. B 
recognises an asset for the sales commissions, subject to recoverability. 
In contrast, the wages for sales staff are not incremental costs because they 
are incurred regardless of whether the contract is obtained. Consequently, 
wages for sales staff are expensed as they are incurred. 
The external consultant costs and legal costs also fail to meet the definition of 
costs to obtain a contract because they are incurred regardless of whether a 
contract is secured.

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178 | Revenue – IFRS 15 handbook
Example 4 – Commission paid on renewals after the initial contract 
is obtained
Telco T pays its sales employees a commission of 30 for each new two-
year wireless contract entered into with a customer. T also pays 10 to sales 
employees each time a customer renews a contract for an additional two years. 
T needs to assess if and when these commissions should be capitalised as 
costs to obtain a contract, subject to recoverability. 
At contract inception, T concludes that the commission of 30 is an incremental 
cost of obtaining the initial contract because the cost would not have been 
incurred if the contract had not been obtained. The contract between T and the 
customer creates no enforceable rights and obligations beyond the initial two-
year period. Because there is no contract beyond the two-year period, T does 
not capitalise at contract inception future commissions that may be payable on 
renewal (i.e. the renewal commission of 10).
On contract renewal, T incurs an additional commission of 10. This commission 
of 10 is an incremental cost of obtaining the second contract because the cost 
would not have been incurred if the contract had not been renewed.
T therefore capitalises both commissions when they are incurred. For 
discussion of the amortisation period, see 
Section 7.3
.