Question: Mighty IT Co provides hardware, software and IT services to small business customers. Mighty IT Co has developed an accounting software package. The company offers

Mighty IT Co provides hardware, software and IT services to small business customers. Mighty IT Co has developed an accounting software package. The company offers a supply and installation service for €1,000 and a separate two-year technical support service for €500. Alternatively, it also offers a combined goods and services contract which includes both of these elements for €1,200. Payment for the combined contract is due one month after the date of installation. Mighty IT Co sells a combined contract on 1 January 20X6, the first day of its financial year.

Required:

(a) When should Mighty IT Co recognize revenue from the combined goods and services contract?

(b) For each combined contract sold, what is the amount of revenue which Mighty IT Co should recognize in respect of the supply and installation service in accordance with IFRS 15?

(c) In accordance with IFRS 15, what is the total amount for deferred income which will be reported in Mighty IT Co’s statement of financial position as at 31 December 20X6?

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a The combined contract contains both goods and services The goods and services element of 1200 is subject to the constraint that it should be recognized in revenue when control over the goods passes ... View full answer

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