Holmes Ltd. Runs a chain a funeral parlours all across the country. They are a private company.

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Question:

Holmes Ltd. Runs a chain a funeral parlours all across the country. They are a private company. Despite constant demand, they are afraid of losing market share. During the current fiscal year, they introduced what they termed a "pre-need" plan where individuals could plan (and pay!!) for their funerals in advance. The advantage to the consumer is they have an agreed upon price, which will not change, and they have peace of mind that they will not be a burden to their loved ones upon their own demise. The advantage to the funeral parlour, in their view, is that they get a sale now which helps improve their income statement. This allows them to easily meet the bank covenant which is based on net income.

The terms of the "pre-need" plan are as follows:

-The total sale price is $ 12,500.

-$ 2,500 down payment, balance in 10 equal annual instalments of $ 1,000.

-Interest at market rates is charged only on late payments.

-The package includes the cemetery lot (estimated value $ 4,000), the coffin and memorial headstone( estimated value $ 7,500) and the showings and service itself (estimated value $ 1,000).

At the time the contract is signed, the customer will normally choose the location and sometimes choose the headstone. The location is then considered final, but the customer, or their family, may choose a different headstone at a later date. If so, the market price at that time will be in force, and the customer will get credit for the amount previously paid. To protect the customer, it is required by Provincial legislation that the monies are held in a separate trust (monitored and controlled by the Provincial government), to be accessed only when customer dies or defaults—specifically, if the customer fails to make the scheduled payments—the money will revert to Holmes. Upon death, if the full amount has not been paid, the estate is responsible for the difference. Should Holmes go out of business, the amounts are refunded to the consumer. There is no other refund provision in the contract.

REQUIRED

Discuss the financial reporting issues using ASPE.

Discuss the financial reporting issues using IFRS.