ExpertMedium2 marksMultiple Choice
ACCA · Question 11 · Recording Transactions and Events
Section A
SolarTech PLC manufactures solar panels. During the year, they introduced a 2% early settlement discount for customers who pay within 10 days. A customer purchases panels with a list price of $50,000. SolarTech expects the customer to take the discount. Under IFRS 15, how much revenue should SolarTech recognize at the point of sale?
Section A
SolarTech PLC manufactures solar panels. During the year, they introduced a 2% early settlement discount for customers who pay within 10 days. A customer purchases panels with a list price of $50,000. SolarTech expects the customer to take the discount. Under IFRS 15, how much revenue should SolarTech recognize at the point of sale?
Answer options:
A.
$50,000
B.
$49,000
C.
$51,000
D.
$0
How to approach this question
Under IFRS 15, variable consideration (like early settlement discounts) must be estimated at inception. If the entity expects the customer to take the discount, revenue is recorded net of the discount.
Full Answer
B.$49,000✓ Correct
According to IFRS 15 Revenue from Contracts with Customers, variable consideration (such as an early settlement discount) should be estimated and included in the transaction price only to the extent it is highly probable that a significant reversal will not occur. If SolarTech expects the customer to take the 2% discount, revenue is recognized net of the discount: $50,000 - ($50,000 * 2%) = $49,000.
Common mistakes
Recording the full $50,000 and only recognizing the discount as an expense when payment is received.
Practice the full ACCA FA — Financial Accounting Practice Exam 6
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