Revenue – ifrs 15 handbook

Indicator_Relevant_considerations_The_entity_is_primarily_responsible_for_providing_specified_goods_or_services'>Indicator
Relevant considerations
The entity 
is primarily 
responsible for 
providing specified 
goods or services
The entity:
– is responsible for acceptability of the specified 
good or service
– has discretion with respect to accepting and 
rejecting orders from customers
– can source the good or service ordered by the 
customer from more than one supplier
– is responsible for delivery and any loss or damage 
between pick up from the supplier and delivery to 
the end customer
– is responsible for the sales strategy 
– is the party the customer believes is responsible 
for fulfilling the promise
The entity has 
inventory risk
The entity:
– obtains, or commits itself to obtaining, the 
specified good or service before obtaining a 
contract with a customer
– is liable for damage and product loss for inventory 
in its possession before sale to the end customer, 
including loss in inventory value
– is liable for customer returns
– commits to a minimum order quantity
– has no right to return unsold inventory to the 
supplier

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248 | Revenue – IFRS 15 handbook
Indicator
Relevant considerations
The entity has 
discretion in 
establishing prices 
for specified goods 
or services
The amount paid to the supplier is:
– a fixed price per unit 
– not a commission or fee basis, which is fixed 
in terms of either an amount of currency or a 
percentage of the value of the underlying goods 
or services
IFRS 15.B37A
The above indicators and considerations are not exhaustive. To assess whether it 
obtains control, an entity needs to carefully assess its facts and circumstances, 
including the nature of the specified goods or services and the terms and conditions 
of the contracts. The indicators and conditions may be more or less relevant to the 
assessment of control, depending on the nature of the specified goods or services 
and the terms and conditions of the contract. In addition, different indicators may 
provide more persuasive evidence in different contracts.
IFRS 15.B35, B38
An entity that is a principal in a contract may satisfy a performance obligation by 
itself or it may engage another party – e.g. a subcontractor – to satisfy some or all 
of a performance obligation on its behalf. However, if another party assumes an 
entity’s performance obligation so that the entity is no longer obliged to satisfy 
the performance obligation, then the entity is no longer acting as the principal and 
therefore does not recognise revenue for that performance obligation. Instead, 
the entity evaluates whether to recognise revenue for satisfying a performance 
obligation to obtain a contract for the other party – i.e. whether the entity is acting 
as an agent.