For a modification under IFRS 15 that adds goods or services that are distinct and priced reflect stand-alone selling prices, how should it be treated?

For a modification under IFRS 15 that adds goods or services that are distinct and priced reflect stand-alone selling prices, how should it be treated?

• A. It is treated as a separate contract if the added goods or services are distinct and the price reflects stand-alone selling prices.
• B. Modify the existing contract and adjust the transaction price.
• C. Derecognize the original contract.
• D. Revenue is recognized only when delivered.

Answer: (D)

Under IFRS 15, when a contract modification adds goods or services that are distinct and the consideration reflects stand-alone selling prices, the added items are accounted for as a separate contract from the modification date. This means you don’t just rebalance the existing contract; you recognize revenue for the new items based on the transfer of control—typically at delivery, or as control passes if the performance occurs over time. So, the revenue from the modification is recognized when the goods or services are delivered, aligning with the point in time when the customer gains control.

Under IFRS 15, when a contract modification adds goods or services that are distinct and the consideration reflects stand-alone selling prices, the added items are accounted for as a separate contract from the modification date. This means you don’t just rebalance the existing contract; you recognize revenue for the new items based on the transfer of control—typically at delivery, or as control passes if the performance occurs over time. So, the revenue from the modification is recognized when the goods or services are delivered, aligning with the point in time when the customer gains control.