Case

Facts:

* Private company

* No desire to go public

* Supplies nutrients and fertilizer for the farming nutrients

* Profitable- potential objective: increase bonuses or minimize taxes

*

** A issue worth 6-8 mark B- 4 marks C-2 marks

* Nature of the type of customer we have:

* Financial stability is dependent on weather and season

* Past history may not reflect what may happen this year

* High risk because it is seasonal

Issue 1: A issue – Revenue Recognition

* 2 types of customers

* guarantee

* 30 days to pay

* Long and short customers differ

* 100% money back guarantee

* cash specified volume in a 2 year period they obtain rebate

* 2 customers: large and small customers

* ASPE

* Performance: when you deliver the product

* 30 days to pay differ between large and small customers

* because there is ups and downs with small customers there may be too much risk and so wait until you collect the cash

* large customers cash collection may be more predictable because of past history etc

* 100% guarantee - set up an allowance

*

* IFRS

* 100% guarantee- if you can predict set up a contract asset in the refund liability

* only recognize revenue up to the amount not to be returned

* Rebate: variable consideration

* if you can predict set up the amount related to the rebate

* reduce the consideration by the amount of the rebate – revise on an annual basis

* if probable you recognize the consideration by the amount less the rebate

* Talk about measurement of the consideration

* identify contract with customer: long term contract is more riskier with the long term customers

* Both

* Net vs gross revenue

*

Issue 2: A issue – Held for sale asset and discontinued operations

* Held for sale asset criteria

* Asset is ready immediately in its current condition...