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The IFRS 15 five-step model is to identify the contract, identify the performance obligations, determine...

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Accounting

The IFRS 15 five-step model is to identify the contract, identify the performance obligations, determine the transaction price, allocate the transaction price and recognize revenue. Looking at step 4, which addresses the allocation of the transaction price, which one of the following statements is reasonable? A suitable approach for estimating the stand-alone selling price of a good or service may be the expected cost plus a margin approach. Noting under this approach the margin must reflect the entitys desired margin. The requirements in IFRS 15 concerning the allocation of the transaction price to each performance obligation do not apply to a contract that has only one performance obligation, because no allocation is necessary. In accordance with IFRS 15 when allocating the transaction price to each performance obligation any discount within the contract must be allocated proportionately to all of the performance obligations in the contract. Usually an allocation of the transaction price based on the stand-alone selling prices of the promised goods or services will faithfully depict the different margins that may apply to the promised goods or services.

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