QUESTION 2 A vendor enters into a contract with a customer to sell 200 units of a product for $ 16,000 ($ 80 per unit). These are to be supplied evenly to the customer over a four-month period (50 units per month) and control over each unit passes to the customer on delivery. After 150 units have been delivered, the contract is modified to require the delivery of an additional 50 units. At the point at which the contract is modified, the stand-alone selling price of one unit of the product has declined to $ 75. What is the effect as per IFRS 15?

 ANSWER 2

As per IFRS 15, if a contract is modified to add distinct goods or services that are priced at their standalone selling prices, the modification is accounted for as a separate contract.

In this case, after delivering 150 units, the contract is modified to add another 50 units. If these additional units are distinct (that is, the customer can benefit from the goods on their own or together with other resources readily available to them, and the promise to transfer goods is separately identifiable from other promises in the contract), and the price of the additional goods is at their standalone selling price of $75, then this modification is accounted for as a separate contract.

Therefore, the additional revenue from the modified contract would be $75 x 50 units = $3750.

The revenue for the first part of the contract would remain $80 x 200 units = $16,000.

So, the total revenue recognized under the contract, after the modification, would be $16,000 + $3750 = $19,750.





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