CERTYNEX IFRS ACADEMY

Vélo Ardent grants on each bicycle a 2-year warranty covering manufacturing defects. The warranty cannot be purchased separately and only provides assurance that the bicycle complies with the agreed specifications. How does Vélo Ardent account for this warranty?

As a separate performance obligation, to which part of the bicycle's selling price is allocated.

In accordance with IAS 37, because it only provides assurance that the bicycle complies with the agreed specifications.

By deferring the entire selling price of the bicycle until the 2-year warranty expires.

It does not account for it at all, since the customer pays nothing extra to obtain it.