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Dear Sir
Could you please help me to understand accounting treatment of the following case:
XYZ Company Limited, a soap manufacturing company, is offering a promotion whereby a customer who purchases three soaps in a single transaction from a store receives a free soap box.
The price of this bundle offer (three soaps and a soap box) is $15. Standalone selling price of a soap is $5. As the company does not sell soap case separately, they argued that they are not required to determine standalone selling price of soap box. The company purchases soap box from a third party which costs $2 and they manufacture soap which costs $3.
At present, the company recognises $15 as revenue, $9 as cost of sales and $2 as marketing expense for a bundle offer.
Questions regarding this case as per IFRS 15 are given below:
i) Do I need to determine standalone selling price of soap box?
ii) What is the correct accounting treatment related to the cost of soap box?
a) Cost of sales
b) Marketing expense
c) Netting off revenueThanks in advance. Appreciate your time and effort.
Warm regards
MymoonHi,
Why have you posted the same question in both the FR and SBR forums? It only needs to be posted in one, and here it is more relevant to SBR, where I have answered it.
Thanks
Thank you for helping me to understand IFRS 15. There is a minor difference between the question posted in FR forum and the question posted in SBR forum which I am quoting below:
” As the company does not sell soap case separately, they argued that they are not required to determine standalone selling price of soap box. The company purchases soap box from a third party which costs $2 ”
Here they are purchasing third party products for promotional purpose. It would be very helpful if you help me to understand this kind of scenario.
Thanks in advance. Appreciate your time and effort.
Warm regards
Mymoon
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