CERTYNEX IFRS ACADEMY

The Autovia dealership sells new vehicles. For several years, it has offered all its buyers free servicing of the vehicle for 2 years; this practice is known to customers and highlighted by its sales staff, but the order form says nothing about it. How does Autovia analyse the promises in a sales contract?

Only the vehicle is promised, as the order form is silent on servicing.

Servicing is an implied promise arising from a customary practice known to customers; it is taken into account to identify the performance obligations.

Servicing is promised only to customers who expressly request it on delivery of the vehicle, each request being a new and separate contract.

Servicing is a mere commercial gesture: its cost is recognised as an expense when performed, with no effect on the analysis of the contract.