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- December 28, 2018 at 12:19 am #499357
Hi,
I’ve came across this question from BPP textbooks, simplified as below:
Entity enter contract with customer on 1-Jan to sell 10,000 unit at $1000 each. Both agrees with customer order 5000 unit more, a volume discount of $950 would apply.
Customer ordered 5000 unit more on 31-Mar
Entity manufactured and delivered 6000 unit during 4 months ending 30-Apr.
Entity manufactured and delivered another 7000 unit by end of 30-Jun (end of reporting period).No mention of who controls WIP goods.
Questions:
1. Is this a Performance Obligation (PO) satisfied at a point of time or over time?Given it does not specify the period of contract nor how long it takes for entity to satisfy the PO. It seems like it’s more ‘a point of time’? Or is the fact that it took entity several months to manufacture and deliver the goods, a good evidence that it’s satisfied over time, despite non of a) / b) / c) from paragraph 35 applies?
It seems the answer recognises this as PO satisfied over time, as it is recognising revenue for both the 6000 and 7000 units. As per my understanding, if it were a PO satisfied at a point of time, given the fact not all 15000 unit were transferred to customer, no revenue should be recognised? Please let me know if I’m wrong.
2.What unit price should we use to recognise for revenue for the 6000 unit, given that the contract modification happened before the final delivery of the 6000 unit?
The answer provided recognised the 6000 unit with the unit price of $1000 (e.g. price pre-contract mod), which clause are we applying here or what assumptions were made in this case?
Much appreciated,
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