Question

The Strait Pirates hockey team sells season ticket packages for their regular hockey season. The season ticket packages are non-refundable and are for 20 regular season games from November 2018 to March 2019. Each season ticket package is sold for $200 and all packages were sold in September 2018.

Required: When would the Strait Pirates recognize this revenue on season ticket sales?

Explain your response using the IFRS 15 Five Step revenue recognition process (refer to your text). List each step and explain how it will be specifically applied by Strait Pirates for this transaction.

Answer 1

As per IFRS 15, The following are the five which steps which needs to be considered in recognizing revenue.

1.Identify the contracts with customer

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations in the contract

5. Recognise revenue when the entity satisfies performance obligation

Step 1: Identify the contract with customer

Assuming there is a contract with the customers.

Step 2: Identify the performance obligations in the contract

At the inception of the contract, the entity should assess the goods or services that have been promised to the customer, and identify as a performance obligation (PO).

• a good or service (or bundle of goods or services) that is distinct; or
• a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

Here the PO is event of games till march 2019.

Step 3: Determine the transaction price

Cost of each package is $200.

Step 4: Allocate the transaction price to the performance obligations in the contracts

The package is for 20 regular seasonal games. so revenue should be apportioned proportionately.

Each game $10.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation (PO)

If an entity does not satisfy its performance obligation over time, it satisfies it at a point in time. Revenue will therefore be recognised when control is passed at a certain point in time.

Revenue is recognised on statisfication of PO.

So on completion of each game revenue should be recognised proportionately. i.e $10 for each game.