ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue
Kappa Ltd licenses bespoke software to a customer and also agrees to customise it significantly, so that the software will not function without the customisation, which only Kappa can perform. Which statement is correct under IFRS 15?
The licence and customisation form one combined performance obligation. The customisation significantly modifies the software and the two are highly interdependent, so the promises are not separately identifiable, even if the contract prices them separately.
- AThe licence and customisation are separate performance obligations because they are separately priced
- BThe licence and customisation are one combined performance obligation because they are not separately identifiableCorrect
- CThe licence is a separate obligation and customisation is a warranty
- DNeither is a performance obligation until the customer pays
Explanation
Where one promise significantly modifies or customises another, or the items are highly interdependent, they are not separately identifiable. Here the licence is inseparable from the customisation, so they form a single performance obligation. Separate pricing does not by itself make them distinct.
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