QUESTION 3 In continuation to question no. 2, if the selling price of the additional units is the stand-alone price at the date of contract modification. Consequently, the additional units are accounted for as being sold under a new and separate contract from the units to be delivered under the terms of the original contract. Is it as per IFRS 15?
ANSWER 3
Yes, under IFRS 15, when a contract is modified to include additional distinct goods or services at their standalone selling price, the modification is treated as a separate contract. This means that the revenue from the additional goods or services is recognized independently from the original contract.
Here is how it looks in a table:
Please note:
- The total revenue of $19,750 is recognized separately as $16,000 from the original contract and $3,750 from the contract modification, which is treated as a separate contract under IFRS 15.
- The total units of 250 is also the combination of the units from the original contract and the additional units from the contract modification.