Revenue – ifrs 15 handbook

Limited examples in the standard of when payments have a 
primary purpose other than financing
IFRS 15.BC233(c)
Determining whether a difference between the amount of promised 
consideration and the cash selling price of the goods or services arises for 
reasons other than the provision of finance requires judgement. An entity 
considers all relevant facts and circumstances, including whether the difference 
is proportionate to any other reason provided. Also, it may be more common 
for the difference to be for a reason other than financing when payments are 
received in advance of the delivery of goods or services.
IFRS 15.IE141–IE142
In some circumstances, a payment in advance or arrears on terms that are 
typical for the industry and jurisdiction may have a primary purpose other than 
financing. For example, a customer may withhold an amount of consideration 
that is payable only on successful completion of the contract or the 
achievement of a specified milestone. The primary purpose of these payment 
terms, as illustrated in Example 27 of the standard, may be to provide the 
customer with assurance that the entity will perform its obligations under the 
contract, rather than provide financing to the customer.
Accounting for long-term and multiple-element arrangements 
with a significant financing component may be complex
Determining the effect of the time value of money for a contract with a 
significant financing component can be complex for long-term or multiple-
element arrangements. In these contracts: 
– goods or services are transferred at various points in time;
– cash payments are made throughout the contract; and 
– there may be a change in the estimated timing of the transfer of goods or 
services to the customer. 

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72 | Revenue – IFRS 15 handbook
If additional variable elements are present in the contract – e.g. contingent 
consideration – then these calculations can be even more sophisticated, 
involving significant cost and complexity for preparers. 
In addition, an entity needs to have appropriate processes and internal controls 
to handle these potential complexities in assessing whether a significant 
financing component exists and, if so, developing the appropriate calculations 
and estimates.