Page 32 - 19. COMPILER QB - INDAS 115

Determine the allocation of transaction price to Product T and M.

Scenario 3

GTM Limited enters into a contract with a customer to sell products G, T and M as described in scenario 2.
The contract also includes a promise to transfer product 'Hope'. Total consideration in the contract is Rs.
2,40,000. The stand-alone selling price for product 'Hope' is highly variable because the company sells Product
'Hope' to different customers for a broad range of amounts (Rs. 40,000 to Rs. 65,000).
Determine the selling price of Products G, T, M and Hope using the residual approach.

Scenario 4
The same facts as in scenario 3 applies to scenario 4 except that the transaction price is Rs. 2,25,000
instead of Rs. 2,40,000.
Discuss how the transaction price should be allocated.

SOLUTION
Scenario 1
The customer receives a discount for purchasing the bundle of goods because the sum of the stand-alone

selling prices (Rs. 2,00,000) exceeds the promised consideration (Rs. 1,90,000). The entity considers that
there is no observable evidence about the performance obligation to which the entire discount belongs. The
discount is allocated proportionately across Products G, T and M. The discount, and therefore the transaction
price, is allocated as follows:

Product Allocated transaction price
Rs.
Product G 85,500 (Rs. 90,000 ÷ Rs. 2,00,000 × Rs. 1,90,000)
Product T 41,800 (Rs. 44,000 ÷ Rs. 2,00,000 × Rs. 1,90,000)
Product M 62,700 (Rs. 66,000 ÷ Rs. 2,00,000 × Rs. 1,90,000)
Total 1,90,000

Scenario 2
The contract includes a discount of Rs. 10,000 on the overall transaction, which would be allocated
proportionately to all three performance obligations when allocating the transaction price using the relative
stand-alone selling price method.
However, because the entity regularly sells Products T and M together for Rs. 1,00,000 and Product G for Rs.

90,000, it has evidence that the entire discount of Rs. 10,000 should be allocated to the promises to transfer
Products T and M in accordance with paragraph 82 of Ind AS 115.
If the entity transfers control of Products T and M at the same point in time, then the entity could, as a
practical matter, account for the transfer of those products as a single performance obligation. That is, the
entity could allocate Rs. 90,000 of the transaction prices to the single performance obligation of G and
recognise revenue of Rs. 1,00,000 when Products T and M simultaneously transfer to the customer.

If the contract requires the entity to transfer control of Products T and M at different points in time, then
the allocated amount of Rs. 1,00,000 is individually allocated to the promises to transfer Product T (stand-
alone selling price of Rs. 44,000) and Product M (stand-alone selling price of Rs. 66,000) as follows:

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