This might also include referring to prices from the entity’s competitors for similar goods or services, and adjusting those prices as necessary to reflect the entity’s costs and margins. The adjusted market assessment approach involves the entity evaluating the market in which it sells goods or services, and estimating the price that a customer in that market would be willing to pay for those goods or services. Suitable methods for estimating the stand-alone selling price of a good or service include (but are not limited to) the following: If stand-alone selling price is not available, the entity must estimate the stand-alone selling price by using an approach that maximises the use of observable inputs and must apply estimation methods consistently in similar circumstances. What if the stand-alone selling price is not available? This is because vendors may grant discounts on list prices, or may not sell the distinct good or services separately from other goods or services. The stand-alone selling price may be, but is not always, the price stated on a price list or the price stated in a contract.

The best evidence of stand-alone selling price is the observable price at which the good or service is sold separately by the entity in similar circumstances, to similar customers in a single transaction. When a contract with a customer contains more than one performance obligation, Step four of the five-step IFRS 15 model requires the entity to allocate the transaction price (determined in Step three) to the performance obligations (identified in Step two) on the basis of relative stand-alone selling price. In this article, we examine Step four of the IFRS 15 five-step model.

In the November 2018, February 2019, March 2019 and May 2019 editions we looked at the third step of the five step process.In the July and September 2018 editions we looked at the complexities of the second step of the five step process.In the May and June 2018 editions we examined the first step of the five step process in greater depth.Since then we have included a number of articles on IFRS 15 in Accounting News: Recognise revenue when a performance obligation is satisfied Identify the performance obligations in the contractĪllocate the transaction price to the performance obligations Identify the contract(s) with the customer In the April 2018 edition of Accounting News, we discussed the five-step model for revenue recognition introduced by IFRS 15 Revenue from Contracts with Customers: Step 1

Step Four - Allocating the transaction price to performance obligations when recognising revenue

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