Question
Assume Bombardier Inc. entered a contract with the Region of Waterloo to sell rapid-rail-transit vehicles to the Region. Sales price is $15 million, estimated costs
Assume Bombardier Inc. entered a contract with the Region of Waterloo to sell rapid-rail-transit vehicles to the Region. Sales price is $15 million, estimated costs are $11,550,000 and the expected delivery date is in 2017. The Region has an AA+ credit rating.
a. Identify, with reference to the Bombardier transaction, the five steps in the recognition process assuming Bombardier uses the asset and liability (contract) approach and follows IFRS 15 [5 marks]
b. Identify the key criteria for revenue recognition assuming Bombardier uses the earnings approach (ASPE). Are there any differences in the two approaches? [3 marks]
c. Would your answer to part (a) above change if the contract with the Region includedvehicle maintenance fora five-year period after delivery? Explain. [2 marks
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