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financial reporting Emefa Ltd Emefa Ltd (Emefa) is a manufacturing and retail company which prepares financial statements in accordance with IFRS up to 31 December
financial reporting
Emefa Ltd Emefa Ltd (Emefa) is a manufacturing and retail company which prepares financial statements in accordance with IFRS up to 31 December each year. In order to generate or improve sales on one of its older products, Emefa offered a promotion named 'something for free'. The promotion included free maintenance services for the first two years. On October 2019, under the promotional offer, Emefa sold goods to a supermarket chain for GHS4.4 million. A two-year maintenance contract would normally be sold for GHS0.5 million, and the list price of the product would normally be GHS5 million. The transaction has been included in revenue at GHS4.4 million. Required: In accordance with IFRS 15: Revenue from Contracts with Customers, justify the appropriate accounting treatment for the above transaction in the financial statements of Emefa for the year ended 31 December 2019. (Hint: Use the 5-step model)Step by Step Solution
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