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IFRS 15Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIFRS 15L3 · Advanced

Software publisher: loyalty programme, multi-year advance payment and costs of obtaining contracts

7 documents14 tasks≈ 90 min
0 / 17 items completed
Standards
IFRS 15 — Revenue from Contracts with Customers
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Orionis Logiciels SA (a fictitious entity) publishes business software. In 20X1, three contracts call for analysis: a licence sold to Hôtels Belvédère SA (a fictitious entity) with a discount voucher from the Orionis Plus loyalty programme, a claims management module paid for by Mutuelle Horizon (a fictitious entity) 2 years before its delivery, and an online subscription concluded with Transports Lumière SA (a fictitious entity) in exchange for a commission paid to the salesperson. You are preparing the financial statements for the year ended 31 December 20X1.

Your assignment

Determine whether the discount voucher conveys a material right, estimate its stand-alone selling price and allocate the price of the licence. Then analyse the financing component of the Mutuelle Horizon contract, calculate the interest and record the entry for the year. Finally, identify the costs of the Transports Lumière contract to be recognised as an asset, calculate their amortisation for the year, record the entries, measure the impact on the financial statements and state the information to be obtained. One document is not useful and one piece of information is missing.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

7 documents: open each one to read it.

Document 1Contract

Licence contract with Hôtels Belvédère

Licence contract of 1 October 20X1 with Hôtels Belvédère SA: perpetual licence of the Orionis Hôtel software, price 300,000, invoiced and collected on signature. Case data: the licence is a performance obligation whose control transfers to the customer on 1 October 20X1, the date on which the software is made available. Under the Orionis Plus loyalty programme, the customer receives a 35% discount voucher on the purchase of the Orionis Paie module, valid for 12 months and capped at a purchase of 100,000, i.e. a maximum discount of 35,000. The payroll module is a different product from the hotel software. No voucher had been used at the reporting date.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Contract price of the licence€300,000.00
Maximum discount obtained with the voucher€35,000.00
Discount available without the voucher€10,000.00
Probability of use of the voucher (management estimate)80%
Observable stand-alone selling price of the licence€300,000.00
Price payable on delivery€1,210,000.00
Payment received on signature€1,000,000.00
Period between payment and delivery2 years
Rate of a separate financing transaction with the customer10%
Yield on government bonds3%
Annual fee€150,000.00
Term of the initial contract3 years
Term of the expected renewal2 years
Expected annual direct costs of providing the service€60,000.00
Salesperson commission€60,000.00
Travel costs for presenting the bid€8,000.00
Legal fees for drafting the bid€12,000.00
Configuration of the dedicated environment€40,000.00
Customer service department overheads€18,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort7

  • Licence contract with Hôtels Belvédère

  • Marketing department memo

  • Contract with Mutuelle Horizon

  • Treasury memo

  • Bank newsletter

  • Subscription contract with Transports Lumière

  • Schedule of costs relating to the Transports Lumière contract

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      14 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Does the discount voucher convey a material right?

      2. Task 2Calculation

        Calculate the incremental discount and the stand-alone selling price of the option.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the incremental discount and the stand-alone selling price of the option.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Stand-alone selling price of the option

      3. Task 3Calculation

        Allocate the price of the licence between the licence and the material right.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Allocate the price of the licence between the licence and the material right.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Transaction price allocated to the material right

      4. Task 4Professional judgement

        Does the Mutuelle Horizon contract contain a significant financing component and which rate should be used?

      5. Task 5Calculation

        Calculate the present value of the price payable on delivery and determine the transaction price.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the present value of the price payable on delivery and determine the transaction price.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Transaction price of the module

      6. Task 6Calculation

        Calculate the total interest, the interest of each year and the contract liability at the reporting date.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the total interest, the interest of each year and the contract liability at the reporting date.

        1. €
        2. €
        3. €
        4. €

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Interest for 20X2

      7. Task 7Journal entries

        Record the interest entry for the year.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      8. Task 8Analysis

        Which costs of the Transports Lumière contract should be recognised as an asset?

      9. Task 9Calculation

        Calculate the asset recognised from the costs of the contract and the costs recognised as an expense.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Calculate the asset recognised from the costs of the contract and the costs recognised as an expense.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Contract costs recognised as an expense for the year

      10. Task 10Calculation

        Determine the amortisation period and calculate the amortisation for the year.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Determine the amortisation period and calculate the amortisation for the year.

        1. years
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Carrying amount at 31 December 20X1

      11. Task 11Journal entries

        Record the entries for the recognition of the asset and its amortisation.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 2

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Journal entry · Journal entries

        Entry 2 of 2

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      12. Task 12Effects on the financial statements

        What is the impact of these entries on the financial statements?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      13. Task 13Missing information

        Which information is missing to support the amortisation period?

      14. Task 14Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 17).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IFRS 15 §B40
      • IFRS 15
      • IFRS 15 §B43
      • IFRS 15 §74
      • IFRS 15 §76
      • IFRS 15 §77
      • IFRS 15 §78
      • IFRS 15 §60
      • IFRS 15 §61
      • IFRS 15 §62
      • IFRS 15 §64
      • IFRS 15 §65
      • IFRS 15 §91
      • IFRS 15 §92
      • IFRS 15 §93
      • IFRS 15 §94
      • IFRS 15 §95
      • IFRS 15
      • IFRS 15
      • IFRS 15 §99
      • IFRS 15
      • IFRS 15 §102