A supplier accepts equity shares of a private start-up customer as full payment for consulting services already rendered. The shares are illiquid and there is no active market from which to observe a price. Under IFRS 15, how should the supplier measure this non-cash consideration?
- At the par or nominal value stated on the share certificates, since that is the only objectively documented amount available
- At the fair value of the shares if that fair value can be reasonably estimated; if it cannot be reasonably estimated, indirectly by reference to the standalone selling price of the consulting services promised to the customer
- At zero, because non-cash consideration is excluded from the transaction price under IFRS 15 until the shares are eventually sold for cash
- At the amount the customer originally paid to have the shares issued, since that reflects the customer's own cost basis in the shares
Why B? And why not the others?
Correct answer: B. At the fair value of the shares if that fair value can be reasonably estimated; if it cannot be reasonably estimated, indirectly by reference to the standalone selling price of the consulting services promised to the customer
IFRS 15 paragraphs 66-67 require non-cash consideration to be included in the transaction price and measured at fair value. If the entity cannot reasonably estimate the fair value of the non-cash consideration, it instead measures the consideration indirectly by reference to the standalone selling price of the goods or services promised to the customer. The option using par or nominal share value is wrong because a certificate's stated par value is an arbitrary legal figure disconnected from fair value and is not a measurement basis IFRS 15 recognizes. The option excluding non-cash consideration from the transaction price entirely is wrong because IFRS 15 explicitly requires such consideration to be included in the transaction price at the time control of the related goods or services transfers, not deferred until a later cash sale. The option using the customer's own historical cost of issuing the shares is wrong because that amount reflects the customer's cost basis, not the fair value (or standalone-selling-price proxy) of what the supplier actually received in exchange for its services.
Source: IFRS 15 Revenue from Contracts with Customers, paragraphs 66-67 (non-cash consideration)