i donot know why the handset is not follow the rules

Example 15.4 provides an illustration of the five-step approach to revenue recognition. EXAMPLE 15.4 Ringaling Ltd provides telephone services to its customers. After satisfying credit and other checks, Ringaling Ltd enters into a signed written contract with one of its customers to supply a mobile handset and a prepaid sim card. If these items were sold separately, the handset would be sold for $200 and the prepaid sim card would provide access to $100 worth of phone calls, a total of $300. However, the selling price for these items as a bundle under this contract is $240, which the customer pays at the time of entering into the contract. This price represents a 20% discount for the bundled offer relative to the selling price of the individual components. The handset is sold 'unlocked" and so it could be used on any other network subject to the access requirements of other providers. The prepaid sim card will remain active until either the $100 worth of calls is extinguished or the end of a three-month period beginning on the day that the contract is entered into Suggested solution Step 1: Identify the contract The contract is a package to supply a mobile handset (a good) and access to $100 worth of calls (a service). Based on the available facts the criteria in paragraph 9 appear to be satisfied as there is a written contract which the parties have approved (as evidenced by their signing of the contract), the written contract sets out the rights of the parties, payment terms are identified, the contract has commercial substance (given there are incremental cash flows to Ringaling Ltd) and the customer pays for the bundle at the time of entering into the contract. Step 2: Identify performance obligations There are two distinct performance obligations - the delivery of the handset and access to the phone network for a specified period. The handset is a distinct performance obligation as it is unlocked and could be used with any other sim card. Similarly, for the period of the contract, the sim card could be used in another unlocked mobile phone Step 3: Determine the transaction price The price of the bundled package is $240. There is no variable consideration, financing component, non- cash consideration or consideration payable to the customer in the contract Step 4: Allocate the transaction price Handset Access/calls Total Stand-alone price $200 100 $300 Allocation 2/3 1/3 $160 80 $240 Step 5: Recognise revenue per performance obligation Handset: Recognise the revenue at a point in time (.e. when control passes on physical delivery of the handset). The delivery of the handset does not satisfy the criteria in paragraph 35 of AASB 15 because: (a) the benefits of the handset are not simultaneously received and consumed by the customer, (b) the handset is not work-in-progress; and (c) the control of the handset has passed to the customer and so the entity cannot give the handset to another customer (see para. 36). Access/calls: Recognise the revenue over time as the customer receives benefits as calls are made-that is, the provision of telephone calls satisfies paragraph 35(a). The customer simultancously receives and consumes the benefits of telephone calls as Ringaling Ltd provides access to call services. An output basis (i.e. as calls are made by the customer) would be appropriate here given the nature of the service and how it is used by the customer. Example 15.4 provides an illustration of the five-step approach to revenue recognition. EXAMPLE 15.4 Ringaling Ltd provides telephone services to its customers. After satisfying credit and other checks, Ringaling Ltd enters into a signed written contract with one of its customers to supply a mobile handset and a prepaid sim card. If these items were sold separately, the handset would be sold for $200 and the prepaid sim card would provide access to $100 worth of phone calls, a total of $300. However, the selling price for these items as a bundle under this contract is $240, which the customer pays at the time of entering into the contract. This price represents a 20% discount for the bundled offer relative to the selling price of the individual components. The handset is sold 'unlocked" and so it could be used on any other network subject to the access requirements of other providers. The prepaid sim card will remain active until either the $100 worth of calls is extinguished or the end of a three-month period beginning on the day that the contract is entered into Suggested solution Step 1: Identify the contract The contract is a package to supply a mobile handset (a good) and access to $100 worth of calls (a service). Based on the available facts the criteria in paragraph 9 appear to be satisfied as there is a written contract which the parties have approved (as evidenced by their signing of the contract), the written contract sets out the rights of the parties, payment terms are identified, the contract has commercial substance (given there are incremental cash flows to Ringaling Ltd) and the customer pays for the bundle at the time of entering into the contract. Step 2: Identify performance obligations There are two distinct performance obligations - the delivery of the handset and access to the phone network for a specified period. The handset is a distinct performance obligation as it is unlocked and could be used with any other sim card. Similarly, for the period of the contract, the sim card could be used in another unlocked mobile phone Step 3: Determine the transaction price The price of the bundled package is $240. There is no variable consideration, financing component, non- cash consideration or consideration payable to the customer in the contract Step 4: Allocate the transaction price Handset Access/calls Total Stand-alone price $200 100 $300 Allocation 2/3 1/3 $160 80 $240 Step 5: Recognise revenue per performance obligation Handset: Recognise the revenue at a point in time (.e. when control passes on physical delivery of the handset). The delivery of the handset does not satisfy the criteria in paragraph 35 of AASB 15 because: (a) the benefits of the handset are not simultaneously received and consumed by the customer, (b) the handset is not work-in-progress; and (c) the control of the handset has passed to the customer and so the entity cannot give the handset to another customer (see para. 36). Access/calls: Recognise the revenue over time as the customer receives benefits as calls are made-that is, the provision of telephone calls satisfies paragraph 35(a). The customer simultancously receives and consumes the benefits of telephone calls as Ringaling Ltd provides access to call services. An output basis (i.e. as calls are made by the customer) would be appropriate here given the nature of the service and how it is used by the customer