ExpertMedium2 marksMultiple Choice
ACCA · Question 02 · Accounting for Transactions
SECTION A
CyberShield Inc. sells a software license bundled with 12 months of mandatory technical support for a total contract price of $120,000. If sold separately, the software license would cost $100,000 and the technical support would cost $50,000.
Under IFRS 15 Revenue from Contracts with Customers, how much revenue should CyberShield recognize immediately upon transferring the software license to the customer?
SECTION A
CyberShield Inc. sells a software license bundled with 12 months of mandatory technical support for a total contract price of $120,000. If sold separately, the software license would cost $100,000 and the technical support would cost $50,000.
Under IFRS 15 Revenue from Contracts with Customers, how much revenue should CyberShield recognize immediately upon transferring the software license to the customer?
Answer options:
A.
$100,000
B.
$120,000
C.
$80,000
D.
$70,000
How to approach this question
Calculate the total standalone selling prices. Then, allocate the actual transaction price proportionally based on the standalone prices.
Full Answer
C.$80,000✓ Correct
Under IFRS 15, the transaction price must be allocated to the performance obligations based on their relative standalone selling prices. Total standalone price = $100,000 + $50,000 = $150,000. Software allocation = ($100,000 / $150,000) * $120,000 = $80,000. This is recognized at a point in time when the license is transferred.
Common mistakes
Recognizing the full standalone price of the software ($100,000) and leaving the residual for support.
Practice the full ACCA FR — Financial Reporting Practice Exam 3
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