Changes in the transaction price

Learning objectives

• Allocate a change in the transaction price on the same basis as at contract inception, recognising immediately the portion relating to obligations already satisfied.L2, L3

Normative references

• IFRS 15 §87After contract inception, the transaction price can change for various reasons, including the resolution of uncertain events or other changes in circumstances that change the amount of consideration to which the entity expects to be entitled.
• IFRS 15 §88Subsequent changes in the transaction price are allocated to the performance obligations on the same basis as at contract inception, without reallocation to reflect changes in stand-alone selling prices. The amount allocated to an obligation already satisfied is recognised as revenue, or as a reduction of revenue, in the period in which the change occurs.
• IFRS 15 §89A change in the transaction price is allocated entirely to one or more, but not all, performance obligations, or to distinct goods or services in a series, only if the criteria in para. 85 are met.
• IFRS 15 §90A change in price resulting from a contract modification follows paras. 18-21. For a change occurring after a modification: if it results from variable consideration promised before the modification and the modification was accounted for under para. 21(a), it is allocated to the obligations identified before the modification; in other cases where the modification is not a separate contract (para. 20), it is allocated to the obligations in the modified contract (unsatisfied or partially satisfied immediately after the modification).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

10 questions

• Once set at contract inception, the transaction price can no longer change, except through a contract modification approved by the parties.L2
• During an industrial maintenance contract, Orvanel observes several events. Which of them may change the transaction price?L3
• Cendrine and its customer approve an amendment that adds services and increases the contract price. How does Cendrine account for the resulting change in the transaction price?L2
• Valdrène builds a footbridge for a fixed price of {fixed_price}, with a bonus of {bonus} if the structure is delivered before an agreed date. At inception, Valdrène excluded the bonus from the transaction price, as its assessment of the constraint on variable consideration did not allow it to be included (case data). Six months later, early delivery is certain and the bonus is earned. Compute the change in the transaction price and the revised transaction price.L2
• The firm Solvarine manages the energy renovation of a building for a fixed fee of {fixed_fee}, plus an energy savings incentive capped at {max_incentive}. At inception, Solvarine included {initial_estimate} for the incentive in the transaction price, an amount it then considered highly probable not to have to reverse (case data). The final measurements set the incentive at {final_incentive}. Compute the change in the transaction price and the revised transaction price.L3
• Azurine's contract included a variable bonus from the outset. A modification, which is not a separate contract, was then accounted for as the termination of the existing contract and the creation of a new contract, the remaining goods being distinct from those already transferred. After that modification, the uncertainty about the bonus promised before the modification is resolved. To which performance obligations does Azurine allocate the price change?L3
• When the transaction price increases after contract inception, the entity allocates the increase to the performance obligations on the basis of their stand-alone selling prices at the date of the change.L2
• Lisière sold a laboratory an analysis instrument and training for its staff, two performance obligations. At contract inception, the transaction price was allocated on the basis of stand-alone selling prices: {equipment_allocation} to the instrument and {training_allocation} to the training. Control of the instrument was transferred in 20X1; the training had not started at 31 December 20X1. At the end of 20X1, the resolution of an uncertainty increases by {price_increase} the amount of consideration to which Lisière expects to be entitled; this change does not relate specifically to either obligation (case datum). At that date, the instrument would represent only {current_equipment_share} of the total stand-alone selling prices. Compute the revenue recognised immediately for the instrument and the amount added to the price allocated to the training.L3
• The heating contractor Marvejols Énergie has a contract with a clinic for the supply of a boiler and its maintenance for 3 years. The initial allocation of the transaction price, based on stand-alone selling prices, is {boiler_allocation} to the boiler, control of which was transferred in 20X1, and {maintenance_allocation} to the maintenance, which will start in 20X3. In 20X2, the resolution of an uncertainty about an overall rebate provided for in the contract reduces by {price_decrease} the consideration to which Marvejols Énergie expects to be entitled; the rebate relates to the contract as a whole (case datum). The stand-alone selling price of the boiler fell to {current_boiler_ssp} in 20X2. Compute the reduction in revenue recognised in 20X2 for the boiler and the revised price allocated to the maintenance.L3
• Nébias Médical sold a hospital an imaging system (obligation satisfied in 20X1, allocated price of 300,000) and an operating support service for 2 years (allocated price of 100,000). A bonus depends on the availability rate achieved through the support service. In 20X2, the estimate of the bonus increases by 12,000. Nébias Médical has established that the payment terms of the bonus relate specifically to its support efforts and that allocating it entirely to the support is consistent with the allocation objective (documented analysis). How is the increase of 12,000 allocated?L3