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A consumer-goods manufacturer pays a retailer ₹1 cr in SLOTTING FEES to secure prominent shelf placement for its products. Under Ind AS 115:
AThe ₹1 cr is a service-purchase from the retailer recognised at full fair value
BThe ₹1 cr is capitalised as an intangible right to shelf space, amortised over the contract period
CThe ₹1 cr is treated as a REDUCTION of the transaction price for products sold to the retailer — the manufacturer does not receive a distinct good/service in exchange
DThe ₹1 cr is a marketing expense, separate from revenue accounting
Answer & Solution
Correct answer: C. The ₹1 cr is treated as a REDUCTION of the transaction price for products sold to the retailer — the manufacturer does not receive a distinct good/service in exchange
Slotting fees rarely provide a distinct good/service to the manufacturer (the manufacturer doesn't "own" the shelf space; it only gets visibility). Under para 70-71, the fee reduces revenue. If the entity DID receive a distinct service at fair value (e.g., separately-priced advertising), it could be treated as a purchase — but slotting fees specifically are flagged in the standard as transaction-price reductions.
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