Revenue – ifrs 15 handbook

Payments to distributors and retailers may be for distinct goods 
or services
Consumer goods companies often make payments to their distributors and 
retailers. In some cases, the payments are for identifiable goods or services 
– e.g. co-branded advertising. In these cases, the goods or services provided 
by the customer may be distinct from the customer’s purchase of the seller’s 
products. 
If the entity cannot estimate the fair value of the good or service received from 
the customer, then it recognises the payments as a reduction in the transaction 
price. If the payments to customers exceed the fair value of the good or service 
provided, then any excess is a reduction in the transaction price.

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3 Step 3 – Determine the transaction price | 83
3.4 Consideration payable to a customer
| 
Slotting fees
Slotting fees are payments made by an entity to a retailer for product placement 
in the retailer’s store. Judgement is required to determine whether slotting fees 
are: 
– 
paid in exchange for a distinct good or service that an entity receives from the 
customer:
these are recognised as a purchase from the supplier – i.e. as a 
prepayment or an expense; or 
– 
sales incentives granted by the entity:
these are recognised as a reduction in 
the transaction price. 
When making this judgement, an entity carefully considers its particular facts 
and circumstances.
Nomination fees
In some cases, an entity makes non-refundable up-front payments to a 
customer before a contract exists. For example, an entity may make a payment 
to a customer under, or in conjunction with entering into, a framework 
agreement. The nature of these payments is evaluated based on the specific 
facts and circumstances. It appears that if such a payment meets the definition 
of an asset, then it may be capitalised and amortised as a reduction in revenue 
over the expected purchases or service period (including renewals) to which it 
relates (see 
Section 7.3
).
When determining the appropriate accounting for an up-front payment, factors 
to consider may include:
– the underlying reason for the payment;
– whether the payment is recoverable: e.g. if an exclusive relationship is 
secured and it is probable that the customer will make sufficient purchases 
to recover the payment; and
– the history of renewals and the average project life, which usually indicate 
whether the expected initial contract will be obtained and whether the 
payment will be recovered through the initial contract or anticipated renewals.
We believe that the entity should assess the recoverability of the capitalised 
payments at each reporting date. This assessment should generally be based on 
the expected future cash flows from the customer.

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© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
84 | Revenue – IFRS 15 handbook