Question
A technology company sells a complex computer program. It promises customers that it will provide updates and virus protection for three years from the date
A technology company sells a complex computer program. It promises customers that it will provide updates and virus protection for three years from the date of sale. Upon sign- ing the contract, the company records an account receivable for the full contract amount, and allocates 80 percent of this amount to current revenue, with the 20 percent remainder recorded as deferred revenue on the balance sheet. It plans to amortize this deferred revenue equally over 3 years.
Required
a. How would revenue recognition under this contract be accounted for under current IFRS 15 and ASC 606 standards (See Section 1.2)?
b. With respect to the accounting for the maintenance component of the contract, compare the relevance and reliability of current lAS 18 and ASC 606 standards with the approach planned by the company.
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