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IFRIC 15 – Clarification of the meaning of continuous transfer

Date recorded:

The Committee received a request asking for clarification on the meaning of the term, 'continuous transfer' in paragraph 17 of IFRIC 15 Agreements for the Construction of Real Estate. In this context, the objective of this discussion was to determine if the Committee planned to take the issue onto its Agenda.

IFRIC 15 prescribes the accounting for revenue from the construction of real estate in situations where the agreement is (a) a construction contract, (b) an agreement for the rendering of services; or (c) an agreement for the sale of goods. Paragraphs 17 and 18 of IFRIC 15 provide for an accounting treatment for the recognition of revenue where the seller transfers to the buyer control and significant risks and rewards of ownership (and where all other criteria in paragraph 14 of IAS are met): (a) if the seller transfers to the buyer control and significant risks and rewards of ownership continuously as construction progresses: revenue should be recognised by reference to the stage of completion; (b) if the seller transfers to the buyer control and significant risks and rewards of ownership in their entirety at a single point in time: revenue should be recognised upon or after delivery of the goods sold. The constituent requesting clarification was aware that whether transfer is continuous or at a single point in time is a matter of judgement requiring appropriate analysis of facts and circumstances; however, the constituent noted that significant divergence exists in practice in interpreting the meaning of a continuous transfer. In addition, such divergences are not limited to certain unique jurisdictions; they occur in several regions, including Asia and South America.

In consideration of any plan to take this issue to its Agenda, the staff noted that the meaning of control is a major issue currently being addressed by the Board. The meaning of continuous transfer is, under IFRSs, an issue that is specific to off-plan sales within IFRIC 15, and in this context, Committee members were asked to limit the scope of this possible project to determine if it is necessary to describe continuous transfer more clearly and to define the unit of account to which continuous transfer applies.

In debating this topic, the majority of the Committee noted the dangers involved in bringing this issue to its Agenda, including the following:

  • The issue described herein is expected to be considered in the scope of the Exposure Draft Revenue from Contracts with Customers, and in applying any interpretive guidance, it would require careful consideration in bridging the revenue recognition environment currently outlined within IAS 18 to that of the Exposure Draft.
  • Application of specific interpretation guidance at individual jurisdictions would serve to obscure the objective of the revenue-related Exposure Draft from its principles-based approach.
  • The local regulatory requirements specific to the construction of real estate are unique to different regulatory jurisdictions, whereby any practical interpretation offered at the Committee-level would be specific to the circumstances offered in the constituent request for clarity, as opposed to the broader principle of application.

Opposition to the above, expressing a view that this particular issue should be brought to the Committee's Agenda, noted the following:

  • The concept of control is only referred to in IAS 18 in paragraph 14(b), with no further guidance as to how to assess that notion of control. The notion of continuous transfer does not exist as such in IAS 18, as the concept is only mentioned in IFRIC 15.
  • The concept of continuous transfer is not defined in such a way as to be helpful in determining whether transfer of control occurs at a point in time only or is instead on a continuous basis.
  • Application of local interpretations, if left open to interpretation, could result in unique application in practice around the world.

The Committee considered the current project on revenue recognition, citing the definition of control specified in paragraphs 25 to 31 of the Exposure Draft, inclusive of specific indicators to help determine that a customer has obtained control of a good. While the Exposure Draft does not refer to the transfer of risks and rewards when providing guidance for revenue recognition, the Committee considered recent deliberations of the Boards in the area of control for revenue recognition purposes, including:

January 2011 Update:

Determining the transfer of goods and services

The Boards affirmed the core principle in the exposure draft that an entity should recognise revenue to depict the transfer of goods and services to a customer.


For determining the transfer of a good, the Boards decided that an entity should recognise revenue when the customer obtains control of the good. The Boards also decided that the revenue standard should:

  • carry forward most of the proposed guidance on control from the exposure draft;
  • describe rather than define control;
  • add 'risks and rewards of ownership' as an indicator of control; and
  • eliminate 'the design or function of the good or service is customer-specific' as an indicator of control.

February 2011 Update:

The Boards tentatively decided that an entity satisfies a performance obligation continuously if at least one of the following two criteria is met:

  • the entity's performance creates or enhances an asset that the customer controls as the asset is being created or enhanced, or
  • the entity's performance does not create an asset with an alternative use to the entity and at least one of the following conditions is met:
    • the customer receives a benefit as the entity performs each task, or
    • another entity would not need to reperform the task(s) performed to date if that other entity were to fulfil the remaining obligation to the customer, or
    • the entity has a right to payment for performance to date even if the customer could cancel the contract for convenience.

As a result of deliberations, and in primary consideration of (1) the specificity of interpretations which would be required in practice at individual jurisdictions and (2) the impending revenue recognition project completion, the Committee confirmed a decision not to add this issue to its Agenda, citing that application principles are set forth in IAS 18 and IFRIC 15.

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