Revenue – ifrs 15 handbook

Total'>Year 1
Year 2
Year 3
Total
Gross sales
150,000
250,000
100,000
500,000
Royalties
15,000
25,000
10,000
50,000
Approach 1: Allocate fixed and variable consideration separately 
T allocates the fixed fee (guaranteed minimum) of 10,000 on a relative stand-
alone selling price basis.
Performance 
obligation
Stand-alone selling 
price
%
Allocation of 
guaranteed 
minimum
Licence
15,000
30%
3,000
Upgrades
35,000
70%
7,000
Total
50,000
100%
10,000
T allocates the estimated variable royalty (in excess of the minimum) of 40,000 
between the two performance obligations on a relative stand-alone selling price 
basis as future usage and sales occur. 
T recognises the variable amounts allocated to the when-and-if-available 
upgrades in the period the amounts are earned because the performance 
obligation is a series of distinct time periods and T meets the criteria to allocate 
the fees directly to the distinct periods in which the sales occur as follows: 
– the fees relate to the customer’s past usage and the licence and when-and-if-
available upgrades; and 
– the allocation is consistent with the allocation objective because the fee is 
consistent from period to period and C’s greater usage reflects additional 
value to C (see 
4.2.2
).

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232 | Revenue – IFRS 15 handbook
The following table summarises the allocation and recognition for each 
performance obligation during the three-year contract term.