IFRS 15 — Training costs to fulfil a contract

Date recorded:

Agenda Paper 5


In its September 2019 meeting, the Committee discussed a submission asking whether the training costs incurred by a supplier in relation to revenue contracts meet the asset recognition criteria in IFRS 15:95. The supplier is able to recharge the cost of training from the customer, but the training is not a performance obligation of the contract.

Of the 17 responses to the tentative Agenda Decision, 9 agreed with not developing an Interpretation or amending IFRS 15. Some respondents questioned the relevance of the accounting outcome and five disagreed with the Committee's technical analysis.

Staff analysis

Some respondents consider that the training costs specifically relating to a contract are different from general training costs described in IAS 38. They consider the training costs meet the criteria set out in IFRS 15:95 to be recognised as assets, whereas a generic training cost would not. The application of IAS 38 which results in the training costs being recognised immediately as an expense would not depict the performance of the contract. The staff continue to agree with the Committee's analysis that IAS 38 should be applied because "expenditure on training activities" is an example of expenditure scoped into IAS 38 and IFRS 15:95 applies only if the costs are not within the scope of another Standard.  The staff further explain that no assets should be recognised because the entity has insufficient control over the expected future economic benefits arising from staff in accordance with IAS 38:15 and some wording changes to the Agenda Decision are proposed to make this clearer. Also, additional explanation from IAS 38:69 is also recommended to be added to link to IAS 38:15 and to explain that such expenditure on training activities should be recognised immediately in profit or loss.

Regarding the proposal to undertake standard-setting to require the application of IFRS 15 by respondents, the staff consider it is not necessary because the outcome of applying IFRS 15:95 is the same as that resulting from applying IAS 38. IFRS 15:BC308 notes that the criteria in IFRS 15:95 ensure only costs that meet the definition of an asset are recognised. It also delivers the message that an entity is precluded from deferring costs merely to normalise profit margins throughout a contract by allocating revenue and costs evenly over the life of the contract. Given that the entity has no control over whether and when employees might leave its employment, the staff concluded that the training costs should be expensed because they do not generate or enhance resources of the entity in satisfying performance obligations in the future.

Some respondents consider that the interaction between IAS 38 and IFRS 15 is circular and should be clarified. IAS 38:3(i) mentions that the Standard does not apply to "assets arising from contracts with customers that are recognised in accordance with IFRS 15”. However, IAS 38:5 mentions the standard applies to "training". It is unclear why IAS 38:5 instead of IAS 38:3(i) is applied. The staff is of the view that there is no conflict between the two paragraphs and the scope of IAS 38 should be read as a whole. They consider IAS 38:3(i) intends to exclude assets which are clearly within the scope of IFRS 15. In contrast, IAS 38:5 specifically requires IAS 38 to be applied to training costs. As such, the staff recommend to amend the wording in the agenda decision to clarify this.

Staff recommendation

The staff recommended finalising the agenda decision, subject to some wording changes.


The Committee members generally agreed with the analysis and the conclusion of the agenda decision. Some considered that the agenda decision should give more guidelines regarding training costs which some entities may incorrectly recognise as assets. Some Committee members referred to EY's comment letter that "recharges" of the training costs are not relevant in the assessment if an asset can be recognised. The staff agreed and will amend the agenda decision to clarify it.

Some Committee members considered that the staff analysis is good in explaining that there is no circularity between IAS 38:3(i) and IAS 38:5, because the Standard should be read as a whole. In view of this, the training costs are clearly in the scope of IAS 38 instead of IFRS 15. With regard to the concerns that the conclusion of no asset being recognised may not be the same if IFRS 15:95 were to be applied, one Committee member preferred if the analysis of IFRS 15:95 and IFRS15:BC307 were not added to the agenda decision.

One Committee member stated that it would be helpful to add IAS 38:20 to explain why no asset is recognised. It is not recognised because the training cost is a kind of expenditure that cannot be separately distinguished. The staff commented that it is difficult to add this because referring to this paragraph may include other fact pattern elements which do not exist in the fact pattern described. Moreover, the staff reminded the Committee that the agenda decision does not aim to preclude the recognition of staff costs as an asset when an entity has sufficient control over it.

The Committee decided, by a unanimous vote, to publish the agenda decision with the amendments discussed.

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