ACCA FR · Chapter 5 · Question 11 of 11
During the year Starling Co made sales of $200,000 under its loyalty scheme. Customers earned points that can be redeemed against future purchases, and the stand-alone selling price of the points awarded is estimated at $10,000. The stand-alone selling price of the goods sold is $200,000. No points had been redeemed by the year end. How much revenue should be recognised for the year? (Round to the nearest dollar.)
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $190,476
Explanation
The loyalty points are a separate performance obligation. The $200,000 received is allocated on the basis of relative stand-alone selling prices. Points = $200,000 x $10,000/$210,000 = $9,524, which is deferred as a contract liability until the points are redeemed or lapse. Revenue recognised for the goods = $200,000 - $9,524 = $190,476.
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