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RAR support for Phased Contracts

anilm1
Explorer
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659

Dear Folks

Request your support on following scenario.

Subscription/Provider contract created for 3 years and each year there is a price increment.

This scenario can be handled through Phased Contracts But the questions whether RAR supports incremental price revenue recognition for the next phase?

Ex: Provider contract is created for 3 years

Year 1 price: $100(Phase 1)

Year 2 price: $110(Phase 2)

Year 3 price: $121(Phase 3)

Since it is only one provider contract for 3 years and the total transaction price is distributed evenly for RAR, how does the actual price would be recognized correctly for each year?

Please advice.

Thanks

Anil

Accepted Solutions (0)

Answers (1)

Answers (1)

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Hi Anil.

According IFRS 15, a phased contract that has an annual increasing price may still require an evenly distributed revenue. It depends on the reason of the increment of the price. For example, whether it is due to an estimated increase of CPI or a mutual agreement of the increment of the usage.

RAR doesn't support a yearly incremental distribution for one single POB/order item. It can only be achieved by a customer deferral method. It also requires additional information such as Z fields on the POB to know how much the increment of the price is.

Best Regards

Xin

anilm1
Explorer
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Thanks @xin. does RAR have the visibility of all the phases(current and future with increased prices) of the provider contract for determining the revenue schedule and equally distribute the revenue recognition across the contract term. As per my analyses, only the current/active phase will be distributed at the provider contract and future phases only will be enabled as and when the phase is active hence RAR may not have the visibility of all the phases of the provider contract to equally distribute the revenue across the contract period(multi years). Please advise. Thanks