Article 1.3 : Detailed, practical, and industry-specific analysis of Step 3 – "Determine the Transaction Price" under IFRS 15,

?? Step 3: Determine the Transaction Price

Under IFRS 15, the transaction price is the amount of consideration an entity expects to be entitled to in exchange for transferring promised goods or services to a customer.

?? Considerations to Determine Transaction Price:

The transaction price should consider:

1. Fixed Consideration: Clearly stated contract amounts.
2. Variable Consideration: Discounts, incentives, penalties, refunds, bonuses.
3. Significant Financing Component: If payments significantly precede or lag the transfer of goods/services.
4. Non-cash Consideration: Goods/services received instead of cash.
5. Consideration Payable to Customer: Cashbacks, rebates, vouchers, or similar incentives.

?? Detailed Industry-wise Analysis with Practical Examples

?? 1. Telecommunications Industry

Case Study: Bundled Smartphone & Mobile Plan

• Scenario: TelecomCo offers a smartphone and two-year service at $60/month, plus an upfront fee of $100. If a customer stays for two years, they receive a $50 cashback at the end.
• Analysis of Transaction Price:

? Conclusion: Transaction price = $1,490.

??? 2. Construction Industry

Case Study: Highway Construction with Early Completion Bonus

• Scenario: ABC Contractors wins a contract for $10 million, with an additional $1 million bonus if completed 3 months early. There's a 70% chance of achieving early completion.
• Analysis of Transaction Price:

? Conclusion: Transaction price = $10.7 million.

?? 3. Real Estate Industry

Case Study: Off-plan Apartment Sales with Financing

• Scenario: Greenfield Ltd. sells an apartment for $500,000 payable after three years (interest-free). Market interest rate is 5%.
• Analysis of Transaction Price (Significant Financing Component):

? Conclusion: Transaction price = $431,919.

?? 4. Software & Technology Industry

Case Study: Software Subscription with Usage-based Pricing

• Scenario: SoftCloud charges an annual fixed fee ($2,000) plus $100 per extra user (expected 5 extra users on average).
• Analysis of Transaction Price:

? Conclusion: Transaction price = $2,500.

?? 5. Automotive Industry

Case Study: Car Lease with Residual Value Guarantees

• Scenario: AutoLease Ltd. leases a vehicle for 3 years at $400/month. At lease-end, it guarantees residual value of $12,000. The car’s estimated residual market value is $10,000.
• Analysis of Transaction Price:

? Conclusion: Transaction price = $16,400.

?? 6. Retail Industry

Case Study: Consumer Goods with Customer Loyalty Points

• Scenario: XYZ Retail sells products for $100, granting points worth $10, redeemable against future purchases (historically 80% redemption).
• Analysis of Transaction Price:

? Conclusion: Transaction price immediately recognized = $92.

?? 7. Healthcare Industry

Case Study: Insurance Reimbursements

• Scenario: MediCare hospital provides surgery costing $20,000, but insurance typically reimburses only 90%.
• Analysis of Transaction Price:

? Conclusion: Transaction price = $18,000.

??? 8. Hospitality Industry

Case Study: Event with Guaranteed Minimum Spend

• Scenario: Grand Hotel hosts a corporate event guaranteeing a minimum spend of $10,000. Historical data shows customers exceed by 20%.
• Analysis of Transaction Price:

? Conclusion: Transaction price = $12,000.

?? 9. Airline Industry

Case Study: Refundable Ticket Sales

• Scenario: GlobalAir sells tickets at $500, but historically 5% of tickets are refunded.
• Analysis of Transaction Price:

? Conclusion: Transaction price = $475.

??? 10. Oil & Gas Industry

Case Study: Fuel Supply with Volume Discounts

• Scenario: PetroCo supplies fuel at $1 million annually, offering a 10% rebate if annual purchases exceed certain thresholds, historically reached by 60% of clients.
• Analysis of Transaction Price:

? Conclusion: Transaction price = $940,000.

?? Common Mistakes:

• Ignoring variable considerations or estimating them incorrectly.
• Overlooking significant financing components.
• Misjudging the likelihood of rebates, discounts, or refunds.

?? Best Practices from IFRS Experts:

• Clearly document assumptions and probability assessments.
• Regularly reassess estimates.
• Consider historical data for accuracy.