Question

Rick enters into a 12-month platinum contract with OSN, which provides Rick with a family plan...

Rick enters into a 12-month platinum contract with OSN, which provides Rick with a family plan (that includes 4 Disney Channels) and a free OSN HD Box for a price of $50 per month. OSN sells the OSN HD Box (which provides a limited number of free channels when connected to any dish in the US) and the same family plan separately for $70 and $45 per month, respectively.

Advise OSN’s accountant on how to recognize revenue from the above sale based on your expertise in the principles-based, five-step model in IFRS 15:

Business   Accounting   
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Answer #1

According to Step 4 (Allocation of price to performance obligations), when a contract contains more than one distinct performance obligation, an entity allocates the transaction price to each distinct performance obligation on the basis basis of the standalone price.

OSN HD Box Standalone price = $70

Family Plan standalone price = $45

Combined sales price = $50

Thus $50 should be be recorded as revenue on the proportion of standalone prices for each producst.

OSN HD Box Standalone price = $50 x 70/115 = $30.44

Family Plan standalone price = $50 x 45/115 = $19.56

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