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Regarding the above lecture, around the 11 min mark there was example one which mentioned that the handset was “free” but the customer pays $45 per month for service. In the lecture it was mentioned how it would be treated under ias 18 but under ifrs 15 i am a bit confused as to how it would be treated.
Is it that since the handset is free there is:
1.no revenue recognized at all for the handset and
2.revenue is recognized for the monthly service of $45 x 12 months?
No. Under IFRS 15 we have to recognise revenue for the handset and then service revenue over the following months.
I’ll put this in the next videos.
ok, but if that’s the case then the revenue would be $45 + $x (value of handset). The $45 would be cr revenue dr cash or receivables, the value of the handset would be cr revenue but where would the dr go to?
The second IFRS 15 lecture has been uploaded where you will find the calculations being performed. Using the numbers for the services we would:
DR Contract receivable