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Dear sir,
IFRS 15 provides some guidance on variable transaction price in step 3 of 5 step model. I would like to know the treatment if not price but performance obligations may change.
For example: Network provider signed with customers to provide 12 month phone services and also gave them a phone. Customers can keep the phone for free at the end of contract but if they breach the contract earlier, the phone must be returned. Would the treatment be different between 2 cases: (1) provider may have actuarial estimation of % customers breaching contract (says, old market) but (2) they may cannot estimate reliably (says, new market).
In this case, phone and service are assumed distinguishable performance obligations.
Thank you in advance!
Hi,
I believe the sale of goods would have to incorporate an estimate of the goods to be returned, based on past experience and future expectations.
The provision of service obligation would just be terminated and no further revenue recognised. If there was still some revenue that was deferred then it would be recognised through profit or loss.
Thanks
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