IFRS 15 provides guidance on accounting for the costs of obtaining and fulfilling a contract with a customer. These contract costs are divided into two categories:

1. Costs to Obtain a Contract: These are incremental costs that the entity would not have incurred if the contract had not been obtained. An example of such costs could be a sales commission. Under IFRS 15, an entity recognizes as an asset the incremental costs of obtaining a contract with a customer if it expects to recover those costs.
2. Costs to Fulfill a Contract: These are costs that relate directly to a contract or a specific anticipated contract. Examples of such costs include direct labor, direct materials, and allocations of costs that relate directly to the contract. IFRS 15 requires entities to recognize an asset from the costs to fulfill a contract if those costs generate or enhance resources that will be used in satisfying future performance obligations, are expected to be recovered, and are not covered by other standards.

Once the costs have been capitalized, they should be amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

Entities also need to consider the impairment of these assets. If the carrying amount of the capitalized costs exceeds the amount that the entity expects to recover (e.g., from the future economic benefits related to the goods or services to which the costs relate), the entity recognizes an impairment loss.

The standard also provides guidance on accounting for the incremental costs of obtaining a contract if the entity chooses to recognize those costs as expenses when incurred. If the amortization period would have been one year or less, the entity is permitted to recognize the incremental costs of obtaining a contract as an expense when incurred.