a) IFRS 15 establishes the principles that an entity applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Applying IFRS 15, an entity recognizes revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To recognize revenue under IFRS 15, an entity follows five steps. Identify these five steps (10 marks)

(b) A company issued 3,000 convertible bonds at par on 1 January 2019.

The bonds are redeemable on 31 December 2022 at their par value of P100 per bond.

The bonds pay interest annually in arrears at an interest rate (based on nominal value) of 5%. Each bond can be converted at the maturity date into 5 P1 shares. The prevailing market interest rate for four-year bonds that have no right of conversion is 8%.

The present value at 8% of P1 receivable at end of:

Year 10.926

Year 20.857

Year 30.794

Year 40.735

Required

Show the accounting treatment of the:

(a)Bond at inception i.e 1 January 2019 (10 marks)

(b)Financial liability component at 31 December 2019 using amortised cost (5 marks)