A company enters into 10,000 contracts with customers, all on the same date. These contracts have very
Question:
A company enters into 10,000 contracts with customers, all on the same date. These contracts have very similar characteristics and therefore (as a practical expedient) the company decides to apply the requirements of IFRS15 to the portfolio of contracts rather than accounting for each contract individually.
Each contract involves the sale of a single product at a price of £30. Customers pay for the product when it is delivered and obtain control of the product on the delivery date. The terms of the contract entitle customers to return the product within 60 days and receive a full refund of the purchase price. Based on previous experience, the company estimates that 4% of customers will exercise their right of return.
Explain how the company should account for these transactions.
PortfolioA portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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When the goods are delivered to the customers the company should n...View the full answer
International Financial Reporting A Practical Guide
ISBN: 978-1292200743
6th edition
Authors: Alan Melville
