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MTP QUESTIONS

Q12. (OCT 18)

The Company has sold certain items to a customer with after sale service for a period of two years from the
date of such sale i.e. 1st October, 2017 without any additional charges. The total amount payable by the
customer is agreed as follows:
● Rs. 8,00,000, if paid by 31st January, 2018;
● Rs. 8,10,000, if paid by 28th February, 2018;

● Rs. 8,20,000, if paid by 31st March, 2018.
Based on past experience it is highly probable that the customer makes the payment before 28th February,
2018. The standalone selling price of the product is Rs. 7,00,000 and two years' services are offered to the
customer at Rs. 1,40,000.
Answer the following:
A. How many transactions are included in the above arrangement as per applicable Ind AS

B. What is the amount of revenue to be considered for revenue recognition as per the applicable Ind AS?
C. What is the amount of revenue to be recognised under Ind AS towards sale of product as per the terms of
the contract with the customer?
D. What is the amount of revenue to be recognised under Ind AS towards sale of service as per the terms of

the contract with the customer?
E. What is the portion of current and non-current liabilities to be presented in the financial statements as
per Ind AS?
SOLUTION

A. Two transactions are included in the above arrangement as per applicable Ind AS ie. sale of item includes
following transactions:
(i) Selling price of item
(ii) Two-years‖ after sale service

B. Revenue attributable to both the components is calculated as follows:
Total fair value of item and two years‖ service period (7,00,000 + 1,40,000) 8,40,000
Less: Sale price of the item and two years‖ service period (8,10,000)
Discount 30,000

Discount and revenue attributable to each component of the transaction:
Proportionate discount attributable to sale of item 25,000
(30,000 x 7,00,000 / 8,40,000)
Revenue from sale of item (7,00,000 – 25,000) 6,75,000

Proportionate discount attributable to two years‖ service period 5,000
(30,000 x 1,40,000 / 8,40,000)
Revenue from two years‖ service period (1,40,000 – 5,000) 1,35,000

C. Revenue in respect of sale of item should be recognised immediately .i.e. Rs. 6,75,000

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