Revenue from Customers’ Unexercised Rights, or ‘Breakage’ (IFRS 15)

Upon receiving a prepayment, an entity must recognise a contract liability for the obligation to provide future goods or services. Once those goods or services are provided, the liability is derecognised and revenue is recognised. Non-refundable prepayments grant customers rights to future goods or services, but customers might not use all these rights, known as breakage. If an entity expects to keep the breakage amount, it should recognise this as revenue in line with the customer’s pattern of exercising their rights. If no breakage is expected, revenue is recognised when it’s unlikely the customer will exercise any remaining rights.

Entities need to assess if they expect breakage by referring to rules on variable consideration estimates. Any consideration received linked to a customer’s unexercised rights that must be given to another party, like a government, should be recognised as a liability, not revenue (IFRS 15.B44-B47).

Example 52 accompanying IFRS 15 illustrates the application of these requirements.


Are you tired of the constant stream of IFRS updates? I know it's tough! That's why I created Reporting Period – a once-a-month summary for professional accountants. It consolidates all essential IFRS developments and Big 4 insights into one readable email. I personally curate every issue to ensure it's packed with the most relevant information, delivered straight to your inbox. It's free, with no spam, and if it turns out not to be right for you, you can unsubscribe with just one click.

More about IFRS 15
See other pages relating to IFRS 15:

© 2018-2024 Marek Muc

The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. Use at your own risk. Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, You can access full versions of IFRS Standards at is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit

Questions or comments? Join our Forums