Offtake Agreement Revenue Recognition (Long-Term Fixed-Price Supply Contract — IFRS 15)

💡 Accountant's Note

Under IFRS 15 / ASC 606, revenue from offtake agreements is recognized when the performance obligation is satisfied — typically when control of the produce transfers to the buyer (usually at delivery, weighbridge, or agreed delivery point). For long-term offtake agreements with variable pricing (e.g., base price ± quality premium/discount), variable consideration constraints must be applied: only include the amount it is highly probable will not be reversed. Key IFRS 15 considerations for agricultural offtake: (1) Performance obligation = delivery of each quantity of produce (usually a series of distinct goods with similar characteristics recognized over time or at each delivery point); (2) Transaction price allocation: if the contract includes both fixed-price deliveries and variable market-linked deliveries, the transaction price for each delivery is determined at delivery date; (3) Advance payments from the buyer (crop financing) create a contract liability (deferred revenue) and may include a financing component if the period between payment and delivery exceeds one year.