(i) Duct, a public limited company, is preparing annual financial statements for the year ended 30 April2016. The entity wishes to early adopt IFRS15 Revenue from Contracts with Customers and requires advice on how the following transactions should be accounted for under the standard.

(ii) Duct sold goods for $240,000 cash on 1 November 2015 and the customer was given a two-year warranty. The entity sells similar goods with no warranty for $220,000. If sold alone, the warranty would expect to sell for $24,000.

(iii) Duct sold a newly developed product for $157 on 1 January 2016 with a credit term of two years.

Although control passed on delivery, the customer can return the item at any time up to 30 April

2016. As the product is relatively new, there is no relevant return history. The product’s cash selling price is $130 and costs $104 to manufacture. At 30 April 2016, the product had not been returned. Ignore the impact of IFRS9 Financial Instruments on the measurement of the amount receivable.

(iv) On 1 March 2016, Duct began providing a monthly service to Sio. Each monthly service is identical.

Each month Duct receives 10,000 ordinary shares in Sio as payment for the service. The fair value of Sio’s shares was $10 and $12 on 31 March and 30 April respectively. Duct intends to hold the shares for trading.

(v) During the year, Duct entered into a one-year agreement to sell $36 million of goods to a large supermarket chain. Duct agreed to pay a non-refundable $1.2 million to compensate the supermarket for the costs incurred in reorganising the layout of the supermarket’s fixtures and fittings so as to stock the Duct products. Duct does not obtain control of the fixtures and fittings under the agreement. At 30 April 2016 Duct had transferred $9 million of goods to the customer.

(vi) During the year, Duct introduced a customer loyalty scheme whereby registered customers receive one $1 loyalty point for every $20 of purchases. Points are redeemable against future purchases.

During the year, registered customers purchased $200 million of goods, which was their stand-alone selling price. Duct estimated that 90% of the points will eventually be redeemed. At 30 April 2016, one third of the expected points have been redeemed. At that date, Duct had not changed its estimate of redemption numbers.

Required:

 Advise Duct of the amounts to be included in the entity’s financial statements for the year ended 30 April 2016 to comply with IFRS 15.

Answer rating: 100% (QA)

Duct should advise the customer that the revenue from the ... View the full answer