Revenue – ifrs 15 handbook

Item 
What to include
Amount
Calculation
Revenue
Widgets not to 
be returned plus 
restocking fee
573
(19
1
× 30) + (1 × 3
2
)
Refund liability
Widget expected 
to be returned 
less restocking 
fee
27
(1 × 30) - 3
2
Return asset
Cost of widget 
expected to be 
returned less 
restocking cost
13
(1 × 15) - 2

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238 | Revenue – IFRS 15 handbook
Notes 
1. Widgets not expected to be returned, calculated as 20 widgets sold less one (20 × 5%) 
expected to be returned. 
2. Restocking fee, calculated as 30 × 10%.
Conditional right of return
IFRS 15.55, B23, B70–B75
The standard does not distinguish between conditional and unconditional rights 
of return and both are accounted for similarly. However, for a conditional right 
of return the probability that the return condition would be met is considered 
in determining the expected level of returns. For example, a food production 
company only accepts returns of its products that are past a sell-by date. 
Based on historical experience, the company assesses the probability that the 
products will become past their sell-by date and estimates their return rate.
Historical experience may be a source of evidence for estimating 
returns
When estimating the amount of consideration expected to be received from a 
sales contract with a right of return, an entity may consider historical experience 
with similar contracts to make estimates and judgements. Using a group of 
similar transactions as a source of evidence is not itself an application of the 
portfolio approach (see 
Section 6.4
 and 
3.1.1
). 
When the entity elects to estimate the transaction price using the expected 
value method and uses a portfolio of data to determine the expected value 
of an individual contract, the estimated amount might not be a possible 
outcome for an individual contract (see 
3.1.1
). Because a sale with a right of 
return represents variable consideration, an entity is also required to apply the 
constraint to its estimate.
IFRS 15.IE110–IE115
The standard includes Example 22 illustrating how to determine the transaction 
price for a portfolio of 100 individual sales with a right of return. In the example, 
the entity concludes that the contracts meet the conditions to be accounted for 
at a portfolio level and determines the transaction price for the portfolio using 
an expected value approach to estimate returns. However, as explained above 
the entity could achieve the same accounting outcome by using the portfolio 
as a source of data, rather than assessing whether the contracts meet the 
conditions to be accounted for at a portfolio level.

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© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
10 Other application issues | 239
10.2 Warranties
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