Revenue – ifrs 15 handbook

Example 35 – Sales taxes: Gross accounting for excise duties
Excise duties may be determined based on production levels and are payable 
to the authorities regardless of whether goods are sold – i.e. the tax payments 
are not refunded by the authorities if the goods are not sold. It appears that 
in these cases the seller is primarily responsible for the tax and it is another 
production cost to be recovered in the pricing of the goods. Accordingly, it does 
not collect the tax from the customer on behalf of the tax authorities and the 
transaction price should be determined on a gross basis, including the excise 
duties recouped from customers. As a result, any excise duties received from 
a customer should be included in the revenue line item and any excise duties 
incurred should be included in the ‘cost of goods sold’ line item.
Example 36 – Sales taxes: Net accounting for excise duties
Excise duties may be recouped from the authorities if the buyer defaults. It 
appears that in these cases the seller is likely to be collecting the tax from the 
customer on behalf of the tax authorities because it is not primarily responsible 
for the tax and does not bear any risk. Under this approach, the amount of 
excise tax should be excluded from revenue and amounts collected should be 
reported as a liability.
Example 37 – Sales taxes: Gross accounting for export taxes
The tax authorities in Country X impose an export tax on certain commodities 
sold to overseas customers; an entity cannot reclaim the tax if the customer 
defaults. It appears that this example is similar to Example 35 in this chapter 
– i.e. the seller is primarily obligated for payment of the taxes, rather than 
collecting the amounts on behalf of the tax authorities. Therefore, the 
transaction price is determined on a gross basis, including any export tax 
recouped from customers. As a result, the export tax is included in the revenue 
line item and export tax incurred is included in expenses or ‘cost of goods sold’.

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90 | Revenue – IFRS 15 handbook
4 
Step 4 – Allocate the 
transaction price to 
the performance 
obligations in the 
contract
Overview
IFRS 15.73, 75
The transaction price is allocated to each performance obligation – generally 
each distinct good or service – to depict the amount of consideration to which 
an entity expects to be entitled in exchange for transferring the promised goods 
or services to the customer.
IFRS 15.74
An entity generally allocates the transaction price to each performance 
obligation in proportion to its stand-alone selling price. However, when specified 
criteria are met a discount or variable consideration is allocated to one or more, 
but not all, performance obligations.
IFRS 15.76
This step of the revenue model comprises two sub-steps that an entity 
performs at contract inception.