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A manufacturer enters two separate contracts to sell the same security system to government-related Entities P and Q (both controlled by the same government). The contracts are negotiated together, with a deep discount triggered ONLY if both P and Q sign up. Under Ind AS 115, these contracts:
AShould be combined only if the discount exceeds 10% of the standalone aggregate price
BShould be combined and accounted as a single contract because P and Q are related parties and the consideration in one depends on the other
CShould be accounted independently because they are with different legal entities
DShould be evaluated separately because related-party contracts cannot be combined under Ind AS
Answer & Solution
Correct answer: B. Should be combined and accounted as a single contract because P and Q are related parties and the consideration in one depends on the other
Para 17 allows combination when the contracts are entered at/near the same time with the same customer OR related parties of the customer, AND any one of: package negotiation with a single commercial objective, consideration in one depends on the other, or single performance obligation across both. P and Q are related (same government) and the deep discount makes one contract's consideration depend on the other — both triggers fire.
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