Submitted by: Submitted by gabbyfletcher
Views: 10
Words: 523
Pages: 3
Category: Business and Industry
Date Submitted: 10/13/2016 12:19 PM
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...