ACCA · Question 16 · Revenue from Contracts with Customers
Section B - Case 1: NovaGrid (Question 1 of 5)
Scenario: NovaGrid, a telecom infrastructure company, entered into a contract on 1 January 20X5 to build a specialized network for a client and maintain it for 2 years. The total contract price is $1,200,000. If sold separately, the network build would cost $1,000,000 and the 2-year maintenance would cost $400,000. The network was completed and handed over on 31 December 20X5.
Additionally, NovaGrid leased a specialized crane on 1 January 20X5 for 3 years. Payments are $50,000 annually in arrears. The implicit interest rate is 5%. (PV of $1 annuity for 3 yrs at 5% = 2.723).
Question: Under IFRS 15, how much of the total transaction price should be allocated to the network build performance obligation?
Answer options:
$1,000,000
$857,143
$800,000
$1,200,000
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