Chapter 17: Revenue from contracts with customers (IFRS 15)

Example 4 - IFRS 15 (2). Lorvent is a computer business that primarily sells computer hardware. As well as selling computers, it also supplies and installs the software to its customers and provides a technical support package over two years. The business commonly sells the supply and installation, and technical support, in a combined goods and services contract. The combined goods and services contract sells for $1,600, but if sold separately the supply and installation is sold for $1,500 and the technical support for $500. Lorvent sold a combined contract on 1 July 20X7, when the installation was completed; its year ends on 31 December 20X7.

Example 1 - Transaction price. Luckers Co. sells a car to a customer for $10,000, offering interest-free credit for a three-year period. The car is delivered to the customer immediately. The annual market rate of interest on the provision of consumer credit to similar customers is 5% (1 / (1.05)³ = 0.8638).

Example 5 - Performance obligations over time. Alex commenced a three year building contract during the year ended 31 December 20X4 and continued the contract during 20X5. Total contract value $45m; costs incurred to date at 31 December 20X5 $20m; estimated costs to completion $12m. Alex measures progress by costs incurred.