NBAA CPA Final Practice Questions - NBAA Certified Public Accountant (CPA) Final Level Exam

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A company modifies a contract with a customer to add a distinct additional product for a price that does not reflect its stand-alone selling price. Under IFRS 15, how should this contract modification be accounted for?

As a separate contract, with the price of the additional product recognized prospectively. As a cancellation of the old contract and the creation of a new combined contract, allocating the remaining transaction price to all unsatisfied performance obligations. As a cumulative catch-up adjustment to revenue on the date of modification. By ignoring the modification until the entire contract is completed.

Correct Answer:

As a cancellation of the old contract and the creation of a new combined contract, allocating the remaining transaction price to all unsatisfied performance obligations.

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