Module $3$: Revenue, presentation and profit

IFRS $15$Revenue from Contracts with Customers

Example $2$: Revenue from contracts with customersOn $1$ January $20$X$5,$ Escot Co enters into a contract to sell computers at $$600$ per unit to Holla Co$.$ If Holla Co purchases more than $300$ units in a calendar year the prices falls to $$575$ per unit.

By $31$ March $20$X$5$ Escot Co has sold $40$ units to the Holla Co and estimates that it will not sell $300$ units by $31$ December $20$X$5.$

What revenue should Escot Co recognise in the quarter ended $31$March $20$X$5?$

Applying IFS $15$:

Escot Co must consider Holla Co's buying pattern in the first three months of the year in order to determine whether Holla Co will purchase sufficient units to achieve the volume discount.

Based on sales to March, it is highly probable that the volume discount will not be achieved by Holla Co and there will not be a significant reversal of the cumulative amount of revenue recognised for Escot Co$.$

Therefore, Escot Co should recognise revenue of $$24,000(40$ x $$600)$ in the first quarter.