IFRS 15 – Costs of obtaining a contract

Under IFRS 15, costs to obtain a contract that would have been incurred irrespective of whether the contract was obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer irrespective of whether the contract is obtained.

The incremental costs of obtaining a contract with a customer are recognized as an asset if the entity expects to recover those costs.  Those incremental costs are costs incurred to obtain a contract with a customer that would not have been incurred if the contract had not been obtained.

The standard provides a practical expedient, whereby an entity may recognize the incremental costs of obtaining a contract as an expense when incurred, if the amortization period of the asset resulting from the incremental costs is one year or less.


Example 1

ABC Ltd, a provider of consulting services, wins a competitive bid to provide consulting services to a new customer for 3 years. The entity incurred the following costs to obtain the contract:

  • Due diligence fees – $12.000
  • Travel costs to deliver bid proposal – $18.000
  • Commissions paid to salesperson – $9.000

The entity recognizes an asset for the $9.000 incremental costs of obtaining the contract arising from the commissions to salesperson.

The costs related to the delivery of the bid proposal & due diligence do not qualify because those costs would have been incurred even if the company did not ultimately obtain the contract.

ABC Ltd should amortize the recognized asset over the three-year contract term.


Contact us to find out more about our pre-designed and tailored IFRS seminars.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s