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Can you please explain what looks like different treatment in the 2 scenarios below?
Mobile phone provided free (stand alone cost is $100). Contract 2 years at $20 per month.
Recognised revenue for phone is proportionate amount only of $82.Caravan Delux Question: $30,000 for caravan (in staged payments) and included in the price is a free 3 year service plan, normally worth $1500. According to answer, the FULL $1500 is deducted from the overall cost and recognised separately.
I understand why recognition (based on performance obligations) is at different stages, but why is free aspect in the 2 scenarios treated differently? The phone at a proportionate amount, but the service plan at the full stand alone price?
Hi,
Under IFRS 15 the amounts are recognised based on their standalone prices, so you’re correct to be curious as to the difference.
Here is it very subtle in that for the caravan it would be sold anyway for $30,000 regardless of whether the free service plan is included or not. In the example of the mobile phone the service contract sold would be at a different price to the $20 if sold separately, so here we allocate the discount across both the phone and minutes. In the example of the caravan the discount is not attached to the service plan as the caravan is sold at its $30,000 price regardless, so the service plan is recognised at its full $1,500 with no discount allocated to it.
Thanks
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