CERTYNEX IFRS ACADEMY

Chaudières Brasier installs boilers with a 5-year warranty that is not sold separately. The warranty provides assurance of the boiler's compliance and also includes an annual preventive visit, which is a service in addition to the assurance of compliance. The two parts are so intertwined that Chaudières Brasier cannot reasonably account for them separately (case data). Which treatment should be applied?

Account for the whole warranty under IAS 37, since it cannot be purchased separately.

Allocate the warranty price equally between the two parts, in the absence of better information.

Account for the assurance and the service together as a single performance obligation, to which part of the transaction price is allocated.

Treat the service as a performance obligation and recognise a provision for the assurance under IAS 37, whatever the difficulties of separation.