IFRS 15 (Promotional Offer)

This topic has 1 reply, 2 voices, and was last updated 7 years ago by P2-D2.

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September 20, 2018 at 11:40 am #475381
sky1743
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- Topics: 10
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Dear Sir

Could you please help me to understand accounting treatment of the following case:

ABC Company Limited, a chocolate manufacturing company, is offering a promotion whereby a customer who purchases two chocolate boxes in a single transaction from a store receives a free chocolate box.

The price of this bundle offer (three chocolate boxes) is $20. Standalone selling price of a chocolate box is $10. The manufacturing cost of a chocolate box is $5.

At present, the company recognises S20 as revenue, $10 as cost of sales and $5 as marketing expense for a bundle offer.

What is the correct accounting treatment related to the cost of free chocolate box in the bundle offer?
a) Cost of sales
b) Marketing expense
c) Netting off revenue

Thanks in advance. Appreciate your time and effort.

Warm regards
Mymoon
September 23, 2018 at 9:23 pm #475600
P2-D2
Keymaster
- Topics: 4
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Hi,

You have to work out the selling price based upon the standalone selling prices. The manufacturing cost is then recognised in cost of sales.

Thanks
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