Question #1 IFRS 15 - Revenue from Contracts with Customers - was issued in September 2015 and applies to accounting periods beginning on or after 1 January 2018. IFRS 15 replaces IAS 11- Construction Contracts - and IAS 18 - Revenue. IFRS 15 contains principles which underpin the timing of the recognition of revenue from contracts with customers and the measurement of that revenue. Required: Explain the principles underpinning the TIMING of revenue recognition and the MEASUREMENT of that revenue which are outlines in IFRS 15. You should provide examples of revenue transactions to support your explanations of these key principles. (12 marks) (b) Delta prepares financial statements to 30 September each year. Notes 1 and 2 provide financial information on revenue transactions relevant to the year ended 30 September 2020. Note 1 - Sale of product with right of return On April 1, 2019 Delta sold a product to a customer for $121,000. This amount is payable on 30 June 2021. The manufacturing cost of the product for delta was $80,000. The customer has a right to return the product for a full refund at any time up to and including 30 June 2019. At April 1 2019, Delta had no reliable evidence regarding the likelihood of the return of the product by the customer. The product was not returned by the customer before 30 June 2019 and so the right of return for the customer expired. On both 1 April 2019 and 30 June 2019, the cash selling price of the product was $100,000. A relevant annual rate to use in any discounting calculations is 10%. (7 marks) Note 2 -Sale with a volume discount incentive On January 1, 2018 Delta began an arrangement to sell goods to a third party - entity B. The price of the goods was set at $100 per unit for all sales in the two-year period ending 31 December 2019. However, if sales of the product to entity B exceed 60,000 units in the two-year period ending 31 December 2019, then the selling price of all units is retrospectively set at $90 per item. Sales of the goods to entity B in the nine-month period ending on 30 September 2018 totaled 20,000 units and this volume of sales per month was not expected to change before 31 December 2019. However, in the year ended 30 September 2019, total sales of the goods to entity B were 35,000 and based on current orders from entity B. the estimate was revised. The directors of Delta estimated that the total sales of the goods to entity B in the two-year period ending 31 December 2019 would be more than 60,000 units. (6 marks) Required: Explain and show how the transactions in notes 1 and 2 would be reported in the financial statements of Delta for the year ended 30 September 2019. Question #1 IFRS 15 - Revenue from Contracts with Customers - was issued in September 2015 and applies to accounting periods beginning on or after 1 January 2018. IFRS 15 replaces IAS 11- Construction Contracts - and IAS 18 - Revenue. IFRS 15 contains principles which underpin the timing of the recognition of revenue from contracts with customers and the measurement of that revenue. Required: Explain the principles underpinning the TIMING of revenue recognition and the MEASUREMENT of that revenue which are outlines in IFRS 15. You should provide examples of revenue transactions to support your explanations of these key principles. (12 marks) (b) Delta prepares financial statements to 30 September each year. Notes 1 and 2 provide financial information on revenue transactions relevant to the year ended 30 September 2020. Note 1 - Sale of product with right of return On April 1, 2019 Delta sold a product to a customer for $121,000. This amount is payable on 30 June 2021. The manufacturing cost of the product for delta was $80,000. The customer has a right to return the product for a full refund at any time up to and including 30 June 2019. At April 1 2019, Delta had no reliable evidence regarding the likelihood of the return of the product by the customer. The product was not returned by the customer before 30 June 2019 and so the right of return for the customer expired. On both 1 April 2019 and 30 June 2019, the cash selling price of the product was $100,000. A relevant annual rate to use in any discounting calculations is 10%. (7 marks) Note 2 -Sale with a volume discount incentive On January 1, 2018 Delta began an arrangement to sell goods to a third party - entity B. The price of the goods was set at $100 per unit for all sales in the two-year period ending 31 December 2019. However, if sales of the product to entity B exceed 60,000 units in the two-year period ending 31 December 2019, then the selling price of all units is retrospectively set at $90 per item. Sales of the goods to entity B in the nine-month period ending on 30 September 2018 totaled 20,000 units and this volume of sales per month was not expected to change before 31 December 2019. However, in the year ended 30 September 2019, total sales of the goods to entity B were 35,000 and based on current orders from entity B. the estimate was revised. The directors of Delta estimated that the total sales of the goods to entity B in the two-year period ending 31 December 2019 would be more than 60,000 units. (6 marks) Required: Explain and show how the transactions in notes 1 and 2 would be reported in the financial statements of Delta for the year ended 30 September 2019