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

Marlow plc sells a software licence (standalone selling price $90,000) and 12 months of support (standalone selling price $30,000) for $100,000. Marlow regularly sells the support alone at a consistent $30,000 and the licence is sold alone at varying prices between $60,000 and $120,000. The discount is not observably linked to the support alone. Which approach to allocating the discount is most consistent with IFRS 15?

The discount should be allocated proportionately to both the licence and the support. IFRS 15 only permits allocation to specific obligations where observable evidence shows the discount relates to them. Without that evidence, the relative standalone selling price method spreads it across all obligations.

  1. AAllocate the discount entirely to the support because it is delivered over time
  2. BAllocate the discount proportionately to both obligations, because no observable evidence links it to one onlyCorrect
  3. CAllocate the discount entirely to the licence because its price varies
  4. DRecognise the discount as a separate expense when the contract is signed

Explanation

IFRS 15 requires a discount to be allocated proportionately to all performance obligations unless observable evidence shows it relates to only some of them. Here no such evidence exists, so the licence gets 90/120 x $100,000 = $75,000 and support $25,000. Variation in the licence price alone does not justify allocating the whole discount to it.

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