Page 12 - 19. COMPILER QB - INDAS 115

SOLUTION

Paragraph 82 of Ind AS 115 states that, “An entity shall allocate a discount entirely to one or more, but not
all, performance obligations in the contract if all of the following criteria are met:
(a) the entity regularly sells each distinct good or service (or each bundle of distinct goods or services) in
the contract on a stand-alone basis;

(b) the entity also regularly sells on a stand-alone basis a bundle (or bundles) of some of those distinct
goods or services at a discount to the stand-alone selling prices of the goods or services in each bundle;
and
(c) the discount attributable to each bundle of goods or services is substantially the same as the discount in
the contract and an analysis of the goods or services in each bundle provides observable evidence of the

performance obligation (or performance obligations) to which the entire discount in the contract
belongs”.
In the given case, the contract includes a discount of Rs. 20,000 on the overall transaction, which should have
been allocated proportionately to all three performance obligations when allocating the transaction price using
the relative stand-alone selling price method. However, as Prime Ltd. meets all the criteria specified in
paragraph 82 above, i.e., it regularly sells Hardware H and Accessory A together for Rs. 1,00,000 and Software

S for Rs. 50,000, accordingly, it is evident that the entire discount should be allocated to the promises to
transfer Hardware H and Accessory A.
In the given case, since the contract requires the entity to transfer control of Hardware H and Accessory A at
different points in time, then the allocated amount of Rs. 1,00,000 should be individually allocated to the

promises to transfer Hardware H (stand-alone selling price of Rs. 1,00,000) and Accessory A (stand-alone
selling price of Rs.20,000)

Product Allocated transaction price (Rs.)
Hardware H 83,333 (1,00,000/ 120,000 x 100,000)
Accessory A 16,667 (20,000/120,000 x 100,000)
Total 1,00,000

However, if Prime Ltd. would have transferred the control of Hardware H and Accessory A at the same point
in time, then the Prime Ltd. could, as a practical matter, account for the transfer of those products as a
single performance obligation. That is, Prime Ltd. could allocate Rs. 1,00,000 of the transaction price to the
single performance obligation and recognize revenue of Rs. 1,00,000 when Hardware H and Accessory A

simultaneously transfer to Zeta Ltd.

Q11 (Nov. 22)

A Ltd. owns 20 resorts across India. Every customer who stays in any of the resorts owned by A Ltd. is
entitled to get points on the basis of total amount paid by him. Under this scheme, 1 point is granted for

every Rs. 100 spent for stay in the resort. As per the past experience of A Ltd., the likelihood of exercise of
the points is 100% and the standalone price of each such point is Rs. 5. Customer X spends Rs. 10,000 in one

of the resorts of A Ltd. What is the accounting treatment for the points granted by A Ltd.?

19. 11