Revenue from Contracts with Customers

SECTION A CloudStream Co, a software-as-a-service (SaaS) provider, enters into a contract with a customer on 1 January 20X5 to provide access to its cloud platform for two years. The total contract price is $120,000, payable upfront. CloudStream also provides a distinct customized integration service for an additional $30,000, completed on 31 March 20X5. How much revenue should CloudStream recognize in its statement of profit or loss for the year ended 31 December 20X5 in accordance with IFRS 15 Revenue from Contracts with Customers?

SECTION B - CASE 3: FinServe Solutions FinServe Solutions Co is a fintech payment processor. The year-end is 31 March 20X7. On 1 April 20X6, FinServe signed a 3-year contract with a major retailer to process their payments. FinServe charged a non-refundable upfront setup fee of $120,000 to integrate the retailer's systems with FinServe's platform. The integration does not transfer a distinct good or service to the retailer. FinServe also charges a 1% fee on all transactions processed. How should the $120,000 setup fee be recognized in the statement of profit or loss for the year ended 31 March 20X7?

**Section A** CloudSync, a tech startup, signs a contract to provide a customer with a customized SaaS platform. The contract requires a non-refundable upfront fee of $120,000 for initial setup (which does not transfer a distinct good or service to the customer) and a monthly subscription fee of $10,000 for 24 months. How much revenue should CloudSync recognize in the first month of the contract under IFRS 15?

**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?

**Section B - Case 1: NovaGrid (Question 2 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:* Assuming the maintenance service begins immediately upon handover on 31 December 20X5, how much revenue in total should NovaGrid recognize in its Statement of Profit or Loss for the year ended 31 December 20X5?

**Section A** CloudStream Inc provides a 12-month SaaS subscription to a client for $120,000, payable upfront. The contract includes a performance bonus of $30,000 if the platform maintains 99.99% uptime for the entire year. At inception, CloudStream estimates a 60% probability of achieving the uptime. CloudStream has extensive experience with similar contracts and uses the 'most likely amount' method. How much revenue should CloudStream recognize in the first month of the contract?

**Section B - Case 2: BioGenix** *Scenario:* BioGenix is a biotechnology firm developing a new gene therapy, 'GeneX'. During the year ended 31 December 20X5, BioGenix incurred the following costs: - $2,000,000 on the research phase (Jan-Jun). - $3,000,000 on the development phase (Jul-Dec), incurred evenly over the 6 months. BioGenix management confirmed that the project met all IAS 38 capitalization criteria on 1 October 20X5. BioGenix also holds a patent for a different drug. On 1 January 20X5, BioGenix licensed this patent to PharmaCo. PharmaCo paid an upfront, non-refundable fee of $5,000,000 for the right to use the patent for 5 years. BioGenix has no further performance obligations. The contract also includes a $2,000,000 milestone payment if PharmaCo achieves $50m in sales in 20X5. By 31 December 20X5, PharmaCo's sales were $30m, and BioGenix determined it is highly probable the milestone will not be met. Finally, BioGenix has a Cash Generating Unit (CGU) that was impairment tested. Carrying amounts: Goodwill $1m, Patent $4m, Equipment $5m. Recoverable amount of the CGU is $7m. *Question:* How much revenue should BioGenix recognize from the PharmaCo licensing agreement for the year ended 31 December 20X5?