You have just signed a contract with Rogers Wireless that provides you with a new iPhone and two years of wireless phone and data service. The terms of the contract specify that the price of the phone is \(\$ 1,000\) and the price for the wireless service is \(\$ 75\) per month, which will be billed to your credit card monthly. After signing the contract, you pay for and receive your iPhone and provide your credit card details for monthly billing purposes.

Requirements

Use Exhibit 3-1 as a guide to explain how Rogers will recognize the revenue from your transaction. Rogers is a public company, so it uses IFRS to prepare its financial statements.

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EXHIBIT 3-1 Application of ASPE and IFRS Revenue Recognition Criteria Criteria ASPE 1. The ownership (or control) and benefits of the goods have been transferred to the customer, or the services have been provided to the customer. 2. The amount of revenue to be received can be reliably measured. 3. It is probable that the customer will pay for the goods or services when payment becomes due, IFRS 1. Identify the contract with the customer, specify its terms, and evaluate the probability the customer will pay the transaction price when it becomes due. 2. Identify the separate performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the separate performance obligations in the contract 5. Recognize revenue when (or as) the business satisfies each performance obligation Sale of Pants by Le Chateau You own the pants and can now benefit from wearing them. The price of the pants is $75. You paid the full $75 in cash. All three criteria are met, so Le Chateau can recognize revenue of $75 after providing you the pants. You did not sign a formal contract with Le Chateau, but by purchasing the pants, you implicitly agreed to its terms of sale, which included the sales price and the requirement to pay for the pants before leaving the store with them, which you did. Le Chteau has one performance obligation, which is to provide you with the pants. The price of the pants is $75. The full $75 price is allocated to the pants. Le Chateau can recognize revenue of $75 after providing you the pants. Repair of Pipe by Plumber The plumber has repaired the pipe. The price of the repair is $75, You paid the full $75 with your credit card. All three criteria are met, so the plumber can recognize revenue of $75 after repairing the pipe. You did not sign a formal contract with the plumber, but by booking the repair, you implicitly agreed to their terms of service, which included the rate per hour and the requirement to pay for the repair upon completion, which you did. The plumber has one performance obligation, which is to repair your pipe The price of the repair is $75. The full $75 price is allocated to the repair of the pipe The plumber can recognize revenue of $75 after repairing the pipe.