Tyres Ltdfinance director has noted significant increases in inventories that is not consistent with the growth in revenue, profitability and well managed production systems. In order to reflect better performance, the director informs you that the management has been recognizing some of the customer orders and deposits as revenue, a scheme called pre-invoicing.The balances for accounts receivable have also increased to more than double within one year. The staff bonus and sales commission have also doubled in record one year. Required

a)Discuss the impact of the management practices on the financial performance and financial positions of the company (5marks)

b)Briefly explain the revenue recognition frame work as per IFRS 15, revenue from contract with customers and clearly indicate how the above violate the framework

Answer rating: 100% (QA)

Notably the management has been recognizing customer orders that are yet to be initiated in an effort to reflect better performance in the company Con... View the full answer