Complex Application Scenarios
Once you master the baseline model, IFRS 15 throws some specific "curveballs" that often appear in advanced accounting exams.
1The Dual Nature of Warranties
Not all warranties are created equal. IFRS 15 distinguishes between warranties that guarantee the product works as promised and those that provide an additional service.
Assurance-Type Warranty
Core Concept: Guarantees the product works as intended at the time of sale.
Separable? No. It is not a distinct performance obligation.
Accounting Standard: Covered under IAS 37 (Provisions).
Service-Type Warranty
Core Concept: Provides an additional, distinct service beyond basic functionality.
Separable? Yes. It is a distinct performance obligation.
Accounting Standard: Covered under IFRS 15 (Revenue Recognition).
2Principal vs Agent
When another party is involved in providing goods or services, you must determine if you are the Principal (Gross Revenue) or the Agent (Net Commission).
Indicators you are the Agent:
- Another party is primarily responsible for fulfilling the contract.
- The entity does not have inventory risk.
- The entity does not have discretion in establishing prices.
- The entity's consideration is in the form of a commission.
3Repurchase Agreements
A repurchase agreement is a contract in which an entity sells an asset and also promises (or has the option) to repurchase the asset.
Forward or Call Option
Customer does NOT have control. It's either a Lease (under IFRS 16) or a Financing Arrangement.
Put Option
Entity repurchases at customer's request. Assessment depends on whether the customer has a significant economic incentive to exercise the option.
The "Control" Pivot
In all these complex cases, the answer always comes back to Control. If the customer hasn't gained the ability to direct the use of and obtain substantially all remaining benefits from the asset, you cannot recognize revenue.