Revenue – ifrs 15 handbook

When does control transfer?
Delivery to the carrier
PO1: Goods
P 2: Service
O
Revenue gross
:
Transport costs: apply
the inventories
standard
Single PO satisfied on
delivery:
Delivery to the
final destination
Principal
Agent
Example 16A – Accounting for transportation costs: Entity is a 
principal
Retailer B enters into a contract with Customer C that involves the following 
two performance obligations: 
– transfer of Product P; and 
– a delivery service.
Based on its evaluation of whether it controls the goods and services before 
transfer to C, B concludes that it is a principal for both performance obligations. 
B allocates the total transaction price between the two performance obligations 
and recognises revenue and costs for each performance obligation as follows.

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10 Other application issues | 263
10.4 Customer options for additional goods or services
| 
– 
Product P:
Revenue is recognised when control transfers to C when P leaves 
B’s premises. The cost of the inventory as determined under the inventories 
standard is derecognised at the same point in time.
– 
Delivery service:
Revenue is recognised over time as the shipping service 
is performed. B considers that the shipping costs are not in the scope of 
another standard and that they do not generate or enhance a resource 
controlled by B that will be used to satisfy a performance obligation in the 
future. Therefore, B expenses the shipping costs as they are incurred.
Example 16B – Accounting for transportation costs: Entity is an 
agent
Modifying Example 16A, Retailer B instead determines that it acts as an agent 
for the shipping service, which is provided by a third party shipping company 
(see 
Section 10.3
).
The accounting for Product P is the same as above.
However, when B is an agent for the delivery service, revenue for arranging the 
delivery service is recognised on a net basis – i.e. net of the amount payable to 
the third party shipping company – when B satisfies its obligation of arranging 
for the delivery service.