Coconut Telegraph Corporation $($Coconut$)$ is a developer and provider of specialized

customer billings and management software and systems. Coconut$$s flagship product, the

Volcano System, is a customer billings and management system consisting of integrated

hardware $($user interfaces and consoles$)$ and related software. Coconut has never sold, nor

does it offer to sell, the Volcano System without the software since the software is

necessary for the Volcano System to function as intended.

On February $1,2018,$ Coconut entered into an arrangement with Buffett Worldwide Inc.

$($Buffett$),$ a restaurant servicer, to deliver the Volcano System and provide one year of

postcontract customer support $($PCS$)$ beginning March $1,2018.$ Buffett paid $$12,000$ on

February $1,2018,$ for the Volcano System and the related PCS$.$ The PCS includes

telephone support, repair or replacement of defective parts, any available software

updates, and any necessary bug fixes for the software. There is no general right of return

on the arrangement. Coconut determined that the arrangement consists of the following

two distinct units of accounting with the respective standalone relative selling prices:

$1.$ Customer management system $$12,000$

$2.$ One year of PCS $2,000$

On May $1,2018,$ and in a separate contract, Coconut agreed to provide Buffett with $(1)$

training services on the customer management system and $(2)$ an additional year of PCS$.$

Under the terms of this agreement, Buffett immediately paid consideration of $$4,500$ for

the additional services. Coconut determined that the standalone relative selling price of

the training services and additional PCS were $$3,000$ and $$2,000,$ respectively. At the

time of execution of this agreement, the customer management system had been

delivered and all other revenue recognition criteria related to the system were met. The

training services are scheduled to begin on June $1,2018.$

Required:

$1.$

$2.$

How should Coconut recognize revenue related to the February $1,2018,$

arrangement. Provide the cumulative revenue recognized and deferred

revenue balance related to the Buffett arrangement as of April $30,2018.$

How should Coconut account for the execution of the May $1,2018,$ agreement?

Provide the deferred revenue balance and cumulative revenue recognized related

to the Buffett arrangement upon execution of the May $1,2018,$ agreement.

Adapated from Deloitte Trueblood Case

Series

$3.$ How would the above analysis differ under IFRS?