Performance obligations satisfied at a point in time

Learning objectives

• Identify the indicators of the transfer of control at a point in time: present right to payment, legal title, physical possession, transfer of the significant risks and rewards, customer acceptance.L1, L2, L3

Normative references

• IFRS 15In assessing whether the customer obtains control of an asset, the entity considers any agreement to repurchase that asset (cross-reference to paragraphs B64-B76).
• IFRS 15 §38If the obligation is not satisfied over time, the entity determines the point in time at which control transfers by applying paragraphs 31-34 and considering indicators, including: the entity's present right to payment; the customer's legal title; the customer's physical possession; the transfer to the customer of the significant risks and rewards of ownership; the customer's acceptance of the asset.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

12 questions

• For a performance obligation satisfied at a point in time, the transfer of legal title to the customer is on its own sufficient to determine when revenue is recognised.L1
• When a performance obligation is satisfied at a point in time, the entity sets that point at the moment the customer obtains control of the asset, using indicators such as physical possession or customer acceptance.L1
• Which of the following is not one of the indicators of the transfer of control listed in IFRS 15 for an obligation satisfied at a point in time?L1
• Ardoisière du Lys sells pallets of roof tiles to a wholesaler. Which of the following facts, observed on 31 March 20X1, are indicators that the wholesaler has obtained control of the tiles?L2
• Fonderie Valmont signs a contract on 2 December 20X1 to sell 40 industrial valves. The valves are delivered and accepted without reservation by the customer on 28 December 20X1; title passes on delivery and the invoice, issued on delivery, is payable within 60 days. The sale is a performance obligation satisfied at a point in time. On which date does Valmont recognise revenue?L2
• Brasserie des Combes delivers kegs to a bar under a consignment arrangement: the brewery keeps the kegs until they are sold on to consumers and can require their return. The brewery must recognise revenue as soon as the kegs are delivered to the bar, since the bar has physical possession of them.L2
• Cartonnerie Maubert sells 20,000 boxes to a logistics company. The contract includes an acceptance clause covering only the dimensions and weight of the boxes. Maubert checks both criteria before shipment and documents compliance. The boxes are delivered on 15 June 20X1; the customer signs the acceptance report on 5 July 20X1. The other indicators (title, possession, right to payment) are present on delivery. When is control transferred?L2
• Optiméa delivers three laboratory analysers to a clinic on 1 October 20X1 for a 90-day trial period. The clinic only commits to pay at the end of the trial and can return the devices free of charge during that period. It uses them from delivery. The trial expires on 30 December 20X1; at that date, the clinic has neither expressly accepted nor returned the devices. When does Optiméa recognise revenue?L3
• Agromat sells six combine harvesters to a farming cooperative. Lacking space in its sheds, the cooperative asks Agromat in writing to keep the machines until spring. On 20 November 20X1, the machines are complete, tagged in the cooperative's name, stored separately and ready for delivery; Agromat can neither use them nor sell them to another customer. Legal title passes and the invoice is due on that date. Which analysis applies to the sale of the machines?L3
• At 30 September 20X1, Ventis is analysing several deliveries of equipment. Which of the following situations indicate that the customer (or the third party) has not yet obtained control of the delivered equipment?L3
• Hexagone Mobilier sells a set of showroom furniture to a hotel. The contract includes a clause under which Hexagone may repurchase the furniture at a later date. Legal title passes on delivery. What must Hexagone do to assess whether the hotel obtains control of the furniture?L2
• Under IFRS 15, the decisive criterion for recognising revenue at a point in time is the transfer of the significant risks and rewards of ownership; the other indicators are merely secondary.L3