IFRS 15 Revenue from Contracts with Customers

**Section A** CloudNet, a Software-as-a-Service (SaaS) provider, signs a 2-year contract with a client for $24,000. The contract requires CloudNet to provide access to its cloud platform and to perform a customized initial setup. The setup does not significantly modify the software and has no standalone value to the customer without the cloud access. CloudNet charges a non-refundable upfront fee of $4,000 for the setup, and $10,000 per year for access. How much revenue should CloudNet recognize in the first year of the contract under IFRS 15?

**Section B - Case 1** *AeroStream is a commercial airline. On 1 January 20X5, AeroStream entered into a contract with a corporate client to provide 10 specific charter flights during the year for a total fixed price of $50,000. As part of the contract, AeroStream also granted the client 50,000 loyalty points, which can be redeemed for future flights. The standalone selling price of one charter flight is $5,500. The standalone selling price of one loyalty point is estimated at $0.10. Also on 1 January 20X5, AeroStream leased a new aircraft for 5 years. The lease requires annual payments of $200,000 in arrears. The implicit interest rate in the lease is 5%. The present value of the lease payments is $865,895. AeroStream incurred initial direct costs of $15,000 to negotiate the lease.* **Question:** Under IFRS 15, what percentage of the total transaction price ($50,000) should be allocated to the loyalty points?

**Section B - Case 1** *AeroStream is a commercial airline. On 1 January 20X5, AeroStream entered into a contract with a corporate client to provide 10 specific charter flights during the year for a total fixed price of $50,000. As part of the contract, AeroStream also granted the client 50,000 loyalty points, which can be redeemed for future flights. The standalone selling price of one charter flight is $5,500. The standalone selling price of one loyalty point is estimated at $0.10. Also on 1 January 20X5, AeroStream leased a new aircraft for 5 years. The lease requires annual payments of $200,000 in arrears. The implicit interest rate in the lease is 5%. The present value of the lease payments is $865,895. AeroStream incurred initial direct costs of $15,000 to negotiate the lease.* **Question:** By 30 June 20X5, AeroStream has provided 4 of the 10 charter flights. None of the loyalty points have been redeemed. How much revenue should AeroStream recognize in respect of this contract for the half-year ended 30 June 20X5?