CERTYNEX IFRS ACADEMY

Ferlance sells 2,000 pallets of wood pellets at EUR 150 per pallet, a price equal to the stand-alone selling price; each pallet is a distinct good delivered separately. After 1,200 deliveries, the customer obtains the addition of 500 pallets at EUR 72, a discount granted to preserve the business relationship and unrelated to the stand-alone selling price, which remains EUR 150. The chief financial officer proposes to account for the 500 pallets as a separate contract at EUR 72. What analysis do you retain?

The proposal is correct: distinct pallets are added, which is sufficient for a separate contract.

The modification is part of the existing contract: at the modification date, Ferlance recognises a cumulative catch-up adjustment to the revenue already recognised on the 1,200 pallets delivered, then continues at the new average price.

It is not a separate contract, as the price does not reflect the stand-alone selling price; as the remaining pallets are distinct, the modification is treated prospectively as a new contract.

No modification is accounted for until the first 1,200 pallets have been paid for.