Costs of fulfilling a customer contract (IFRS 15)
If costs of fulfilling a customer contract are not within another applicable standard, IFRS 15 requires an asset only when they relate directly to a contract or specific anticipated contract, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. The asset is amortised consistently with transfer of the related goods or services and assessed for impairment. Costs that fail the criteria are expensed as incurred under the applicable requirements. A capitalised cost asset is distinct from an IFRS 15 contract asset, which represents a conditional right to consideration.
Worked example
A service provider incurs $8,000 of setup costs directly for a specific two-year customer contract. Assuming the costs are outside another standard, generate resources for future service and are recoverable, it recognises an asset and amortises it consistently with the services transferred.
Common mistake
Assuming every setup cost qualifies for capitalisation without checking all three conditions and other applicable standards.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |