ICAEW AF · Chapter 8 · Question 8 of 9
On 1 November, a customer paid a business £6,000 in advance for six months of maintenance services starting on that date. The business's year ends on 31 December. Services are provided evenly over the period. Under IFRS 15 Revenue from Contracts with Customers, what amount should be shown as a contract liability (deferred income) at 31 December?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £4,000
Explanation
Revenue is recognised as the performance obligation is satisfied over time. By 31 December, 2 of the 6 months have been provided, so revenue = 2/6 x £6,000 = £2,000. The remaining £4,000 relates to services still to be provided and is a contract liability.
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