Revenue recognition Fonterra Cooperative Group Limited (Fonterra), a New Zealand dairy cooperative, uses the accrual basis of accounting and recognizes revenue at the time it sells products or renders services. Fonterra applies New Zealand accounting standards and reports its results in millions of New Zealand dollars (NZ$). In answering this problem, assume Fonterra uses IFRS. Indicate which of the following transactions or events immediately gives rise to Fonterra’s recognition of revenue.
a. Fonterra has completed the pasteurization of an order of 13,000 liters of milk it will deliver to a grocery store chain next week. Fonterra has not yet delivered the milk or invoiced the grocery store. The selling price of the milk is NZ$26,000.
b. Refer to part, and assume that the grocery store paid Fonterra a deposit of NZ$5,000 on the order of the milk.
c. Fonterra delivered the milk and billed the grocery store. The grocery store has not yet paid the invoice.
d. One day after delivery, the grocery store called Fonterra and reported that it has to destroy 3,000 titers of milk because it had spoiled sometime prior to its delivery. The grocer refuses to pay for these 3,000 liters.
e. Fonterra spent NZ$10 million to develop a technique to transform a by-product of casein (a protein found in milk and cheese) into ethanol. Fonterra expects to use this technique to generate sales of at least NZ$2 million over the neat year.
f. Refer to part c, and assume that Fonterra signed contracts worth NZ$400 million for ethanol sales.