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    Question

    A company sells air-conditioners with a 2-year free

    maintenance service included in the contract. The customer pays the full consideration upfront at delivery. As per Ind AS 115, revenue should not be recognised fully on the date of sale. Instead, it must be allocated between the product and service obligations. Which of the following is the most appropriate treatment?
    A Recognise the entire revenue on delivery of goods. Correct Answer Incorrect Answer
    B Defer the full revenue until maintenance is completed. Correct Answer Incorrect Answer
    C Allocate transaction price between sale of ACs and service, recognising goods revenue immediately and service revenue over time. Correct Answer Incorrect Answer
    D Recognise revenue only when payment is received. Correct Answer Incorrect Answer
    E Recognise revenue equally in each accounting year, irrespective of service proportion. Correct Answer Incorrect Answer

    Solution

    Ind AS 115 requires separation of performance obligations. The product revenue is recognised when delivered, while maintenance revenue is recognised over the service period.

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