You are on the financial team for a new startup - a pizza industry that manufactures portable pizza ovens. The company is famous for creating the world's first portable pizza oven in 2012, and there is a group of back garden pizza ovens allowing anyone to eventually become a pizza chef. Since 2012, the company has grown widely and adopted International Financial Reporting Standards to present its financial statements. CEO - Ali is the product designer and has no knowledge of the accounting process. He recently attended an internal audit committee meeting that discussed several financial reporting issues. After the seminar, he reviewed the financial statements for the year ended December 31, 2019. Based on this review, he prepared a series of inquiries that he asked you to explain: Inquiry 1: There was a brief discussion regarding the change in revenue processing under a contract with clients. I understand that our company sells 10 different types of pizza ovens at a price ranging from 100 OMR to 500 OMR. It is true that all these products are sold to a customer with a promise to provide maintenance service in the first year. Someone mentioned that there were some changes to IAS 18, and according to the previous standard, the company recognized all of the consideration as revenue when transporting the product. Accordingly, no corresponding amount will be deferred to be recognized as revenue when maintenance service is provided later. But this will definitely change now. Could you please explain to me the change in revenue treatment in accordance with the revised International Standard 15? Query 2: A discussion took place at the meeting regarding the company's recent transportation contract with Wings Transportation to employ a four-year delivery truck. The delivery truck will be used to transport goods from our factory in Ibri to all places in Amman. The truck is expressly specified in the contract and has replacement wings only for any repairs and damages. The truck will be used for a purpose other than delivering goods. Our company determines the goods that will be transported on the truck and the dates of receipt and delivery. The wings operate and maintain the truck and are responsible for the safe delivery of the goods. Our company is prohibited from using another land transportation company to transport goods or operate the truck itself. I heard that this contract will be treated as an operating lease in accordance with the old IAS 17 standard, but this old standard has been revised to IFRS 16 and treatment will change. Can you explain how this contract with Wings Transport is handled in accordance with the provisions of IFRS 16? Wanted: Provide answers to the questions your CEO has asked. Provide a detailed explanation. Your reporting standards (IFRSE standards). (2 x 5 marks = 10 scores minimum 150-200 words).

Answer rating: 100% (QA)

Inquiry 1 The new revenue recognition standard IFRS 15 requires revenue to be recognized when a customer obtains control of a good or service Control ... View the full answer