Frontier Ltd. is a company that provides holistic proofreading, editing and advisory services for clients. It enters into a 3-year contract with client Sapphire with the following clauses:

• Frontier will provide holistic proofreading and advisory activities for Sapphire, including monthly writing analysis and advice and yearly progress report.

• Monthly advice and annual progress reports are based on the editing and proofreading services provided by Frontier's team.

• The annual fee is £34,400 per year, consisting of £31,200 per year for up to 156,000 characters, £100 per month for monthly analysis and advice and £2,000 for the

annual progress report.

• Frontier is entitled to 50p per character in excess of 156,000 characters per year.

• Frontier is entitled to an annual bonus payment of £10,000 if the average processing time of one chapter of 3,000 characters is less than three days in the particular year.

Based on Sapphire's historical writing activities, it is estimated that the number of characters produced is 140,000 in the first year, 156,000 in the second year and 160,000 in the third year. Based on past working patterns, Frontier assumes that the probability of processing time of 3,000 characters in less than three days is 20%.

Question:

Identify performance obligations (POs) in the contract AND determine the transaction price; provide detailed workings and explanations with reference to relevant

international accounting standard.

Answer rating: 100% (QA)

Performance Obligations 1 Holistic proofreading and advisory activities for Sapphire including monthly writing analysis and advice and yearly progress ... View the full answer