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Telco G grants a one-time RETENTION CREDIT of ₹50 to a customer in month 14 of a 24-month contract. The credit is purely discretionary (not in response to service issues), and customers do not regularly receive such credits. Under Ind AS 115, this credit is accounted for as:
AAn immediate refund liability with the full ₹50 reducing revenue on day 1
BA marketing expense in the month it is granted
CVariable consideration retroactively reducing all prior revenue
DA CHANGE in transaction price treated as a contract modification, recognised over the remaining 10 months of the contract
Answer & Solution
Correct answer: D. A CHANGE in transaction price treated as a contract modification, recognised over the remaining 10 months of the contract
A retention/goodwill credit granted after contract inception is a CHANGE in transaction price. Since it does not relate to a satisfied PO (it benefits remaining service), Ind AS 115 requires it to be accounted for as a contract modification — allocated to the remaining POs and recognised over the remaining term. It is NOT variable consideration (which is uncertainty around the original transaction price).
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