ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue
Hartley Group's subsidiary, Vane Ltd, sells a phone for $600 and a 24-month airtime plan for $40 per month in a single contract; the customer pays $0 for the phone and $40 monthly. Vane sells the phone alone for $600 and the plan alone for $40 per month ($960 over 24 months). The group's consolidation adjusts revenue to IFRS 15. Total consideration is $960. What revenue is recognised for the phone at the start of the contract?
$369 is recognised for the phone at the start. The total consideration of $960 is allocated by relative standalone selling prices: 600 of 1,560 total. The phone revenue exceeds the cash received initially, so a contract asset arises, and the remainder is recognised on the plan over 24 months.
- A$0
- B$369Correct
- C$600
- D$960
Explanation
Total SSP is $600 + $960 = $1,560. The phone receives 600/1,560 x $960 = $369 and the plan $591 over 24 months. Recognising $0 follows the cash received, and $600 uses the full SSP and ignores the discount. This creates a contract asset for the phone revenue exceeding cash received.
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