On 1 June, a company sold goods with a list price of $6,000 to a credit customer. The customer receives a 10% trade discount and is offered a 3% settlement discount for payment within 10 days. At the date of sale the company expects the customer to take the settlement discount. Ignoring sales tax, at what amount should revenue initially be recognised under IFRS 15 Revenue from Contracts with Customers?

Correct answer: D) $5,238

Explanation

Trade discount is deducted first: $6,000 x 90% = $5,400. Under IFRS 15 a settlement discount is variable consideration, and because the customer is expected to take it, revenue (and the receivable) is recognised at the expected consideration: $5,400 x 97% = $5,238. If the customer later pays outside the discount period, the extra $162 is recognised as revenue at that point. $5,400 would be used only if the customer was not expected to take the discount, and $5,820 wrongly ignores the trade discount.