Tyres Ltd finance 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 inform you that the management have 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 (5 marks) 

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

Answer rating: 100% (QA)

a Impact of the management practices on the financial performance and financial position of the company As per the GAAP Deferred revenue also known as unearned revenue which means the advance payments ... View the full answer