Revenue – ifrs 15 handbook

Example 10 – Mobilisation costs
Company E enters into a contract with Customer F to construct an office 
building. E determines that there is one performance obligation in the contract 
(construction of the building), which is satisfied over time. 
E incurs mobilisation costs to bring heavy equipment to the building site. E first 
determines that these costs are not in the scope of another standard, noting 
that the costs are not part of the cost of property, plant and equipment and no 
inventory will be recognised related to the work in progress because control 
transfers to the customer as the building is constructed. E also incurs costs in 
relocating employees to the building site.
E determines that the mobilisation costs related to bringing the heavy 
equipment to the building site meet the capitalisation criteria because they:
– are directly related to the contract with the customer; 
– enhance a resource controlled by E (i.e. the heavy equipment), which will 
be used to satisfy E’s performance obligation, which is construction of the 
building; and
– are expected to be recovered. 
E therefore capitalises the mobilisation costs related to the heavy equipment. 
In contrast, the costs that E incurs to relocate employees are not capitalised. 
These costs do not meet the definition of an asset because E cannot control the 
resource enhanced by the cost, which is its employees.
Example 11 – Reconfiguration costs
Company F enters into a contract with Customer G to build a customised 
item. To fulfil the contract, F incurs up-front costs to reconfigure its production 
facility to create the specialised item. These costs consist primarily of direct 
labour hours (salaries and wages) of employees. After the specialised asset is 
completed, F expects to incur similar costs to restore its production facility to its 
original state. The costs to initially reconfigure the facility and the costs to return 
the facility to its original state are explicitly chargeable to G under the contract.
F determines that the up-front and back-end reconfiguration activities do not 
transfer a good or service to the customer and there is only one performance 
obligation in the contract – i.e. building the specialised asset. F determines that 
it will recognise revenue over time using an output measure of progress. 

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7 Contract costs | 187
7.3 Amortisation
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