International Financial Reporting Standard (IFRS) 15 Revenue from Contracts with Customers introduces a comprehensive and robust framework for the recognition, measurement and disclosure of revenue that applies to a wide range of transactions and industries. The standard was developed jointly by the International Accounting Standards Board (IASB) and United States Financial Accounting Standards Board and became effective for annual reporting periods beginning on or after 1 January 2018.

The IASB is currently undertaking a Post-implementation Review of IFRS 15. As part of this review, the IASB has issued a Request for Information (RFI) to seek feedback from stakeholders on specific areas of the standard. In October 2023, the Institute’s Standard Setting Department responded to the RFI. This article summarizes our primary comments and recommendations. The full response is available on our website.

Overall, we consider that IFRS 15 has achieved its objectives. It provides a logical model for applying accounting principles to transactions and assists entities in determining accounting treatments in a comprehensive and systematic manner. Nevertheless, we have identified application issues relating to certain aspects of the requirements that warrant the IASB’s further consideration.

Principal versus agent assessment

Our respondents noted that entities often assess whether they are a principal or an agent solely based on the indicators in IFRS 15.B37 and overlook the concept of control. Additionally, assessing whether an entity controls the specified good or service before it is transferred to the customer can be judgmental and challenging, particularly for transactions involving intangible or non-physical items and provision of services, which are widespread in Hong Kong. Furthermore, new forms of operation, such as digital platforms, have introduced additional challenges.

In light of the above, we recommend the IASB incorporate the key messages from IFRS 15.BC385H into the body of the standard to emphasize that the indicators were included to support the assessment of control and should not override it. In addition, we recommend the IASB add indicators in IFRS 15.B37 to assist entities in performing control assessment for intangible and service-based transactions, accompanied by illustrative examples.

Non-cash consideration

The prevalence of non-cash considerations (including in some cases consideration payable to a customer), such as shares and warrants, has risen significantly and their impact on financial reporting can be substantial under the current volatile market. However, there is a lack of guidance on the following areas:

Measurement date

Entities currently adopt different approaches regarding the measurement date of non-cash consideration. They measure it either at contract inception, when the non-cash consideration is received, or when the related performance obligation is satisfied. The timing difference between these dates may have a significant impact on the measurement of non-cash consideration. We consider that requiring entities to measure non-cash consideration at contract inception is consistent with other requirements in IFRS 15 for determining the transaction price and for allocating the transaction price to performance obligations, and is less complex to apply in practice. Furthermore, it aligns with the requirements of Topic 606 in the U.S. Generally Accepted Accounting Principles. Accordingly, we recommend the IASB reference Topic 606 to address this matter.

Subsequent changes in measurement of non-cash consideration

There is diversity in practice in the accounting for subsequent changes in measurement of non-cash consideration. In particular, it is unclear whether it should be accounted for as variable consideration under IFRS 15 or under other applicable IFRS Accounting Standards, such as IFRS 9 Financial Instruments. Questions arise regarding the application of the variable consideration requirements in IFRS 15 in situations where the changes in the fair value of non-cash consideration relate to both the form of consideration and other reasons. We acknowledge the challenges associated with determining the appropriate allocation of fair value changes between those attributable to the form of consideration and those arising from other reasons. In this regard, we recommend the IASB provide guidance on the accounting for changes in the fair value of non-cash consideration that relate to both the form of consideration and other reasons, and expand the existing Example 31 on non-cash consideration to illustrate the relevant requirements.

Determining the transaction price

We have identified several application issues regarding the determination of transaction price and recommend the IASB clarify how the relevant requirements in IFRS 15 should be applied. These issues include:

  • How should an agent account for marketing incentives paid to end customers in three-way arrangements?
  • How should consideration payable to a customer be accounted for if it exceeds the amount of consideration expected to be received from the customer? and
  • How would an entity that is a principal estimate the amount of revenue to recognize if it were not aware of the amounts being charged to end customers by the agent?


This article was contributed by Katherine Leung, Associate Director and Sam Chan, Manager of the Institute’s Standard Setting Department.

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