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ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue

Dalton Co sells goods to a customer for $200,000 with a volume rebate. Dalton estimates a 70% probability the customer will qualify for a $20,000 rebate and 30% it will not (rebate nil). The most likely amount method is considered the better predictor. Applying IFRS 15 and the constraint, what transaction price should Dalton use?

The transaction price is $180,000. Because the outcome is binary and a rebate is most likely, the most likely amount method applies, reducing the $200,000 price by the full $20,000 rebate rather than a probability-weighted amount.

  1. A$180,000Correct
  2. B$194,000
  3. C$186,000
  4. D$200,000

Explanation

The most likely outcome is that the rebate is earned (70%), so variable consideration is reduced by $20,000, giving $180,000. The expected value method would give $200,000 - 14,000 = $186,000, but it is not the better predictor for a binary outcome.

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