Home › CA Final › financialreporting › revenuerecognition › Software Company S licenses CRM software to Cust…
Software Company S licenses CRM software to Customer B on Day 1 and, three days later in a SEPARATE contract, agrees to provide significant customisation services without which B cannot use the software. Under Ind AS 115, the two contracts:
AShould be accounted as two independent contracts because they were signed on different dates
BShould each be evaluated under Step 1 independently — combining is not required for services
CShould be combined and accounted as a single contract because they are entered at near the same time with the same customer and the goods/services together form a single performance obligation
DShould be combined only if the customisation fee exceeds the licence fee
Answer & Solution
Correct answer: C. Should be combined and accounted as a single contract because they are entered at near the same time with the same customer and the goods/services together form a single performance obligation
Para 17(c) requires combination when the goods/services in two contracts (signed at or near the same time with the same customer) together constitute a single performance obligation. Because B cannot use the software without the customisation, the licence and customisation services are highly interdependent — a single performance obligation — so the contracts must be combined.
Related questions
A four-year service contract allows the customer to cancel without cause at the end of eacA contract has the customer's UNILATERAL right to terminate a wholly unperformed contract New Way Ltd. enters a ₹12.5 lakh networking-product contract with a customer in a region fStep 1 of Ind AS 115 requires the entity to conclude that it is PROBABLE it will collect sA manufacturer enters two separate contracts to sell the same security system to governmenAn entity enters a contract for 200 hours of customisation work at ₹150/hour (single perfoAn entity has transferred 60 products out of a 120-product contract at ₹1,000 each. The coA contract modification that adds DISTINCT goods or services at a price reflecting the sta