IFRS 15 — Assessment of promised goods or services

Date recorded:


The Committee received a submission about whether a stock exchange (entity) provides an admission service that is distinct from an ongoing listing service. The entity charges a customer two types of fee related to listing on the exchange: (i) admission fees which are non-refundable upfront fees that relate to activities the entity undertakes to enable the customers' admission to the exchange, including due diligence reviews for new applications and education services provided to customers, and (ii) ongoing fees which are periodic fees payable by customers, after having been admitted to the exchange, as the entity provides ongoing market access and maintains the listing. The submission identifies that a customer obtains the benefits of access to capital and being enabled to raise finance at the time of admission for growth and further development from the activities that the entity undertakes for the customer's initial listing.

The submitter asks whether, applying IFRS 15, the entity identifies as separate performance obligations an initial listing service and an ongoing listing service.

Staff analysis

Having considered the core principle of revenue recognition in IFRS 15 (i.e. revenue is recognised when an entity transfers the control of a good or service to a customer) and the fact pattern that the entity charges the customer a non-refundable upfront fee as well as ongoing listing fees, the staff analyse that the issue of the submission is whether the entity promises to transfer to the customer a service of initially being listed as well as a service of being listed on an ongoing basis, or instead it promises to transfer only one service of being listed on the exchange, rather than an assessment of 'distinct' as described in IFRS 15:27–30 of IFRS 15.

The staff consider that undertaking the activities for an initial listing does not represent the transfer of a service to the customer since those activities are required to ‘successfully transfer the promised goods or services for which the customer has contracted’ (IFRS 15:BC93). The staff also consider the benefits to the customer arise as a result of being listed and the customer did not have those benefits before being listed. In the case of the listing application being rejected, the customer continually refines their application until the listing authority is satisfied that the customer meets the listing criteria. This shows that the customer does not obtain any benefit from the entity that might indicate the transfer of a good or service on initial listing.

The staff further analyse whether the provision of other services in the contract (e.g. education) results in the transfer of a service to the customer. This depends on the type of education provided to a customer. If the entity is merely guiding the customer through the listing application process, there is no transfer of service to a customer. In contrast, if the education is on matters other than the application process then it may result in the transfer of an education service to the customer. The staff also note that the identification of a promised education service does not necessarily mean that the entity would recognise as revenue the non-refundable upfront fee at the time of providing the education to the customer. In that situation, the entity would first assess whether the education service is distinct. The entity would then allocate the transaction price to each performance obligation in the contract in an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services. The staff also note in some circumstances that entities allow customers to extend their listing beyond the initial non-cancellable period and an entity needs to consider whether the contract includes a material right that the entity identifies as a performance obligation separate from the listing service.

The submission also discussed whether passporting right (e.g. customers of an entity operating in the European Economic Area have the right to use an approved prospectus to obtain a listing on a second exchange) provides evidence of the transfer of a good or service to the customer on initial listing. The staff consider a customer’s right to use the passporting facility as similar to some other reciprocal agreements and it does not provide evidence of a service promised to the customer on initial listing.

Staff recommendation

The staff do not recommend to add this matter to the Committee's standard-setting agenda since the staff think the requirements in IFRS 15 provide an adequate basis for an entity to identify performance obligations in the fact pattern described in the submission. Instead the staff recommend to publish an agenda decision, discussing the application of IFRS 15 to the fact pattern described in the submission. The staff also recommend that the Committee provide a conclusion regarding the assessment of the promised goods or services in the contract, which would be helpful to stakeholders in obtaining a common understanding of the requirements.


At the beginning of the discussion, some Committee members expressed their views that they agree with the staff analysis particularly since as it states in the paper that the set-up fee is not a transfer of goods and services and the initial listing services is not distinct from the ongoing listing. A majority of the Committee members considered there is only one performance obligation judging from the fact pattern. One of the Committee members has concerns that the non-linear revenue recognition may result in a relatively high amount of revenue being deferred because the fee for initial listing is normally higher while the fee for ongoing listing is lower. The Committee decided, by a majority of votes, not to add this matter to the Committee's agenda but to publish an Agenda Decision.

In respect of the proposed wording of the tentative Agenda Decision, the Chair highlighted that the Committee has to think carefully about the appropriateness of the fact-specific Agenda Decision. The Chair asked for Committee members' opinion on whether the benefits to lay out the specific and narrow fact pattern in the Agenda Decision outweigh the risks and emphasized that the fact pattern laid out has to be very clear. Some Committee members considered that with the detailed fact pattern, it is useful to illustrate how to apply the principle-based IFRS 15. The staff asked if the tentative Agenda Decision should also address the timing of revenue recognition because this is a relevant discussion under which there is an upfront fee received. One Committee member also suggested that, the term "benefits" in the sentence "The Committee observed that the benefits obtained by the customer from being listed on the exchange arise as a result of being listed" in the third page of the tentative Agenda Decision shall be changed to "listing service". The Committee decided, by a majority of votes, that the Agenda Decision shall only include analysis about performance obligations but not the timing of revenue recognition (including timing for revenue recognition of subsequent listing), before the Committee looks into such further analysis prepared by the staff.


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