Revenue – ifrs 15 handbook

Example 11 – Cumulative effective method: Rebate arrangement
Food Company F enters into a supply agreement with Customer S under which 
S receives a tiered-volume rebate depending on the number of purchases that 
it makes in a two-year period. The agreement includes no minimum purchase 
quantities. F has elected to transition to the new standard using the cumulative 
effect method and has elected to apply the completed contracts practical 
expedient. F’s date of initial application is 1 January 2018. 
This is a completed contract for all goods delivered to S up to 31 December 
2017 because F has transferred all of the goods or services identified under the 
previous requirements. 
This conclusion applies regardless of whether the rebate arrangement is applied 
to purchases on a prospective or retrospective basis, because the definition 
focuses on the transfer of the goods identified and not the completion of the 
accounting for the transaction. 
Because the contract is a completed contract, F accounts for the transaction 
in accordance with its existing accounting policy. However, any purchases 
made from 1 January 2018 onwards are accounted for in accordance with the 
new standard.
Example 12 – Cumulative effective method: Incomplete contract
Retailer R has a customer loyalty programme that allows customers to 
accumulate redeemable points for each purchase that they make. 
R has elected to transition to the new standard using the cumulative effect 
method and has elected to apply the completed contracts practical expedient. 
R’s date of initial application is 1 January 2018. 
The contracts for the sales of goods, including loyalty points, are not completed 
contracts as at 31 December 2017. R has not transferred all of the goods 
and services identified under the previous requirements, because there are 
unredeemed points at 31 December 2017. 
Because the contracts are not completed contracts, R is required to apply 
the new standard to its customer loyalty programme and record any required 
adjustments at the date of transition of 1 January 2018.

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340 | Revenue – IFRS 15 handbook