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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Sunrise Software Ltd. sells a perpetual licence to Kavya Traders for ₹6,00,000 and agrees to provide post-delivery technical support for 2 years. The support is separately identifiable and its fair value is ₹60,000. The licence has been delivered and the buyer has accepted it on 1 January 2025. Under AS 9, how much revenue is recognised at the time of delivery of the licence (excluding support)?

Revenue of ₹5,40,000 is recognised on delivery. The ₹60,000 attributable to two years of separately identifiable support is deferred and recognised over the service period, so it is deducted from the total price of ₹6,00,000.

  1. A₹6,00,000
  2. B₹5,40,000Correct
  3. C₹6,60,000
  4. D₹5,70,000

Explanation

The price of ₹6,00,000 includes the support fee. Support is a separate service recognised over 2 years. Licence revenue at delivery = 6,00,000 - 60,000 = ₹5,40,000. Recognising the whole ₹6,00,000 ignores the unearned service element.

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