IFRS 15Chapter 6Lesson 1
Step 4 (1): allocating the price on stand-alone selling prices
Step 1 of 8Learning objectives
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A contract often has a single price for several performance obligations satisfied at different dates. Step 4 splits that price: each obligation receives a share proportionate to its stand-alone selling price, determined at contract inception. That price is observed when the entity sells the item on its own; otherwise it is estimated (adjusted market assessment, expected cost plus a margin, and the residual approach in two cases only).
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Learning objectives
- Explain the objective of the allocation and why it is made obligation by obligation.
- Allocate a transaction price in proportion to the stand-alone selling prices determined at contract inception.
- Choose and apply an estimation method when the stand-alone selling price is not observable.
- Check the conditions for the residual approach and record the entries that follow from the allocation.