ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue
Parent Co sells goods to its subsidiary Sub Co and, in the same contract with an external customer, Sub Co bundles the goods with a distinct installation service it provides. In the consolidated financial statements, which is correct?
Intragroup sales are eliminated in full on consolidation. Group revenue reflects only performance obligations satisfied for the external customer, with the goods and distinct installation recognised separately as control passes, avoiding double counting of the internal sale.
- ARevenue from the intragroup sale is kept, because it is a distinct performance obligation
- BIntragroup sales are eliminated, and consolidated revenue reflects only the performance obligations to the external customerCorrect
- COnly the installation revenue is eliminated
- DRevenue is recognised once at the intragroup sale and once at the external sale
Explanation
Consolidated statements present the group as a single entity, so intragroup transactions are eliminated in full. Revenue is recognised only for the goods and installation delivered to the external customer, each as its own performance obligation, at the point or over the period control passes.
Did you get it right without looking?
One question tells you little. A timed set on Revenue shows your real accuracy, how long you take and where you lose marks.
More Revenue questions
- Perla plc has a three-year contract to build a specialised asset for a single customer. The asset has no alternative use to Perla, and Perla…
- Marlo Co enters a contract to build a facility for $2,000,000. It will earn a bonus of $300,000 if completed by 30 June. Marlo assesses a 70…
- Zenith plc sells a machine and a one-year maintenance contract to a customer for a total of $120,000. The standalone selling price of the ma…
- Kappa Co agreed to supply 1,000 units at $50 each, delivered over six months. After 400 units were delivered, the customer and Kappa agreed …
- 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 custome…
- Kappa Software grants a customer a licence to use its game software as it exists at the grant date. Kappa has no obligation to update it and…