BC312 A 'learning curve' is the effect of efficiencies realised over time when an entity's costs of performing a task (or producing a unit) decline in relation to how many times the entity performs that task (or produces that unit). The phenomenon of a learning curve can exist independently of a contract with a customer. For example, a typical manufacturer that produces units of inventory would become more efficient in its production process over time. Some respondents asked how to apply the proposals to account for the effects of learning costs in a contract with a customer.

BC313 The boards noted that IFRS 15 addresses the accounting for the effects of learning costs if both of the following conditions are satisfied:

(a) an entity has a single performance obligation to deliver a specified number of units; and

(b) the performance obligation is satisfied over time.

BC314 In that situation, an entity recognises revenue by selecting a method of measuring progress that depicts the transfer over time of the good or service to the customer. An entity would probably select a method (for example, costto-cost) that results in the entity recognising more revenue and expense for the early units produced relative to the later units. That effect is appropriate because of the greater value of the entity's performance in the early part of the contract because, if an entity were to sell only one unit, it would charge the customer a higher price for that unit than the average unit price the customer pays when the customer purchases more than one unit.