1 answer

4. What is a multiple-element transaction? Give two examples of these and discuss how AASB 15/IFRS...

Question:

4. What is a multiple-element transaction? Give two examples of these and discuss how AASB 15/IFRS 15 applies to such transac
4. What is a multiple-element transaction? Give two examples of these and discuss how AASB 15/IFRS 15 applies to such transactions.

Answers

A multiple-element transaction is one in which there are separately identifiable components to each ofwhich the recognition criteria must be applied in order to reflect the substance of the transaction. Thetotal consideration for the transaction is allocated between the elements.

Examples include: the sellingprice of a product that includes an amount for subsequent servicing; and a telephone service providerwho provides a free handset to a customer who subscribes for a service contract. Paragraph 73 of AASB15/IFRS 15 requires an entity to allocate the transaction price to each performance allocation (or distinctgood or service) identified in the contract on a relative stand-alone selling price basis that the entityexpects to be entitled. In the first example, the amount for subsequent servicing shall be identified,deferred and recognised as revenue over the period during which the service is performed.

As for the second example, the telephone service provider shall record the sale of handset and theService subscription by proportionately allocating the consideration received.

Thank you

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