Allocation of transaction price
Generally allocate in proportion to the stand-alone selling prices of the promised goods or services when the contract is established. Estimate a stand-alone selling price when it is not directly observable. IFRS 15 provides specific criteria for allocating a discount or variable consideration to fewer than all performance obligations. Recognise each allocated amount as the relevant obligation is satisfied.
Worked example
A product and service have stand-alone prices of $800 and $400. If the bundle’s $900 transaction price is allocated proportionately, the product receives $600 and the service $300. Revenue follows transfer of each distinct item.
Common mistake
Allocating the entire contract price to the first delivered item or allocating by invoice labels without considering relative stand-alone prices.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |