Clarifications to Ifrs 15 Revenue from Contracts with Customers

Clarifications to IFRS 15 Revenue from Contracts with Customers

IFRS 15 Revenue from Contracts with Customers is a global financial reporting standard that aims to simplify the recognition of revenue from contracts with customers. It establishes a robust framework for companies to report revenue that reflects the economic substance of the underlying transactions. The standard applies to all types of contracts, including those that involve the sale of goods and services.

Since its adoption in 2018, IFRS 15 has been subject to various clarifications and interpretations. In this article, we will review some of the essential clarifications to IFRS 15 that businesses need to be aware of.

Clarification 1: Identifying the Performance Obligations

As per IFRS 15, revenue should be recognized when a company satisfies a performance obligation by fulfilling its contractual obligations. A performance obligation is a promise to provide a product or service to a customer.

The clarification related to identifying performance obligations is that companies should segregate the individual products or services they offer to customers and consider them as separate performance obligations. This means that if a company provides customers with multiple goods or services, it should identify each of these as a separate performance obligation.

Clarification 2: Variable Consideration

Variable consideration refers to the amount of revenue that is subject to change based on various factors such as customer incentives, refunds, and rebates. IFRS 15 allows companies to estimate the amount of variable consideration and recognize revenue accordingly.

The clarification related to variable consideration is that companies should estimate variable consideration based on the best possible estimate of the amount. This means that companies should consider the probabilities of various outcomes and use a range of estimates, rather than a single point estimate in determining variable consideration.

Clarification 3: Contract Modifications

A contract modification is a change in the terms and conditions of a contract that were not included in the original agreement. IFRS 15 requires companies to account for contract modifications as new contracts or as modifications of existing contracts.

The clarification related to contract modifications is that companies should account for modifications as new contracts only if the services or goods provided in the modification are distinct from the original contract. If the new services or goods are not distinct, companies should account for contract modifications as an amendment to the existing contract.

Clarification 4: Non-Refundable Upfront Fees

IFRS 15 allows companies to recognize revenue from non-refundable upfront fees received from customers when the company fulfills its obligations under the contract. The clarification related to non-refundable upfront fees is that the company should consider whether the fee relates to a distinct good or service or not. If the fee relates to a distinct good or service, the company should recognize the revenue when the good or service is delivered.


IFRS 15 simplifies revenue recognition for companies and promotes consistency in reporting revenue across different business units. However, to implement the standard effectively, companies should be aware of the various clarifications and interpretations related to the standard. By adhering to these clarifications, companies can accurately report revenue from contracts with customers and ensure compliance with the IFRS 15 standard.