Laelia Ltd sells airplanes for $20,000 each. These airplanes are designed for individual use and can transport customers up to 200 kilometres in one go. Laelia Ltd can also provide custom-designed hangars for its customers airplanes at Dawson Creek, Queensland for $2,500 per year. These hangars can only cater to airplanes sold by Laelia Ltd due to regulations. Laelia Ltd sells these items either separately or as a package.

On 1 October 2020 Laelia Ltd enters into a contract to sell an airplane and one year of hangar facilities to Peter Do for $20,500. Cash payment is required at this date, after which legal title to the airplane passes to Peter Do and the hangar services commence. Peter Do is free to fly the airplane anywhere and he is not bound by any restriction. Please ignore effects of GST.

REQUIRED:

(a) Explain how Laelia Ltd would account for the revenue associated with this transaction with Peter Do in accordance with the requirements of AASB 15 Revenue from Contracts

Step 1 Identify the contract

Step 2 Identify the performance obligation(s)

Step 3 Identify the transaction price

Step 4 Allocate the transaction price

Step 5 Recognise the revenue as performance obligation(s) is(are) satisfied