Revenue – ifrs 15 handbook

Example 30 – Payments to customers: Credits to a new customer
Customer C is in the middle of a two-year contract with Telco B, its current 
wireless service provider, and would be required to pay an early termination 
penalty if it terminated the contract today. 
If C cancels the existing contract with B and signs a two-year contract with Telco 
D for 80 per month, then D promises at contract inception to give C a one-time 
credit of 200 (referred to as a ‘port-in credit’). The amount of the port-in credit 
does not depend on the volume of service subsequently purchased by C during 
the two-year contract. 
D determines that it should account for the port-in credit as consideration 
payable to a customer. This is because the credit will be applied against 
amounts owing to D. Because D does not receive any distinct goods or services 
in exchange for this credit, it will account for it as a reduction in the transaction 
price (i.e. 80 × 24 - 200). D will recognise the reduction in the transaction price 
as the promised goods or services are transferred.
Example 31 – Payments to customers: Consideration paid to a 
customer’s customer
Supplier X enters into a contract with Supplier Y to sell components worth 1,500 
during the year as a subcontractor. The contract is in the scope of the standard. 
Y will then integrate these components into parts that it sells to Carmaker Z.
As part of the arrangement, X has agreed to pay a one-off administrative fee of 
15 to Z so that it can be added to Z’s list of suppliers. 
Supplier Y’s (parts)
Supplier X
(components)
Carmarker Z
(Supplier Y’s customer)
Components
Fee
Final product
X notes that Z is the end customer in a distribution chain that includes Y. 
Therefore, payments to Z may be considered as consideration payable to a 
customer.
X concludes that the payment to Z is not in exchange for a distinct good or 
service. Consequently, X determines that the payment of 15 is a reduction in 
the transaction price, which it recognises as a reduction in the revenue earned 
as it transfers the promised components to Y.

---

© 2019 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
3 Step 3 – Determine the transaction price | 87
3.4 Consideration payable to a customer
|