REVENUE FROM CONTRACTS WITH CUSTOMERS You are the Financial Manager of TravelNam Ltd, a travel company that sells holiday packages to its wide range of customers in the Namibian Tourism industry. TravelNam Ltd has a year-end of 30 June 2022. Below is information pertaining to different elements of TravelNam Ltd.s financial statements? Revenue from contracts with customers - Valentines Special Packages TravelNam provides accommodation to tourists in Namibia, mostly based in the Southern Part of Namibia up until the beginning of the current year. TravelNam prepared the following special package for Valentines Day of which couples could spend 2 nights at the hotel and receive other amazing benefits as below: - Roses Bouquet for the women upon arrival from the rose garden. Roses are strictly reserved for female customers upon checking into their hotel rooms. -Accommodation with amazing open glass ceilings for two nights. Accommodation is usually charged at N$ 2500/pp sharing. -Breakfast and the Chefs specials for the night is charged at N$ 250.00 each for all day visitors and is served on open self-service basis. Day visitors do come in for lunch/dinner on a regular day. -Live band champagne sundowners and Paint Bonding are reserved for the valentines customers to experience love in the hearts of the Namibian Desert. On an ordinary day sundowners are charged at N$500 and customers do not get the live band or paint bonding sessions. These are specifically set for the valentines special and is not a service the Hotel plan to provide on a regular basis. The valentines special package is paid for in advance with the due date of 01 January 2022. The services on the package are to be carried out on 14-15 February 2022. The full couples package is priced at N$ 15 000.00 per couple for two nights. Below is an extract of the price table at TravelNams site on a normal day of business. Services Amount Accommodation PP/N 2500 Breakfast 250 Sundowners 650 Dinner 250 Customers are allowed to remove the following services from their valentines package upon arrival at the Hotel: Live Band, Sundowners and Lovers wine and Paint bonding. Should customers opt for this option, the price of the contract changes to N$ 14 000.00. PROPERTY PLANT AND EQUIPMENT Below is an extract of the statement of financial position for TravelNam Ltd as at 30 June 2021. TravelNam Ltd Statement of Financial Position As at 30 June 2021 2021 N$ Non-Current Assets CA Property Plant and Equipment 4 593 333 Buildings 2 613 333 Land 1 500 000 Vehicles 396 667 Furniture and Fittings 83 333 Notes to the Financial Statements 1. Accounting Policies 1.2 PROPERTY PLANT AND EQUIPMENT Non-Current Assets Acquired Date Residual Value Useful Lives Model Buildings 01-Mar-20 100 000.00 10 Cost Model Land 31-Dec-19 - 0 Cost Model Vehicle 01-May-19 - 5 Cost Model Furniture and Fittings 27-Jun-19 20 000.00 3 Cost Model June 2022 Additional Information: 1. In September 2021, TravelNam acquired an aircraft for the hotel that they are constructing in the middle of the Zambezi River to expand business. The aircraft will assist with pick up of their clients from Rundu to the hotel as incidents of Hippo and Crocodile accidents rise in the region, The company opted to rather fly the clients as opposed to picking them up with the boats. Information of the aircraft purchase is as below: The aircraft will require major inspections every year-end. The cost of the aircraft is N$ 2 000 000. Estimated useful life of 8 years and with no residual value. TravelNam elected to measure the aircraft using the revaluation method on gross replacement model, and the first revaluation was performed on 30 June 2022. Gross replacement cost amounted to N$2 500 000 on 30 June 2022. 2. You as the financial manager discovered that due to the COVID 19 Pandemic, the Hotel in the Namib Desert was not doing so well in the 2021 financial year and which led to the indications of Impairment of the buildings upon your evaluation. 3. An independent valuator valued the fair value of the building to be N$ 2 400 000. Expected cash flows to be derived from the building for the next years up until useful life is N$ 18 000 per month as from 01 July 2022. Should TravelNam decide to sell the building, it will cost N$ 50 000 in transaction costs. Consideration of impairment has not been recorded in the 2021 financial period and the time value of money is considered material. 4. NamTravels vehicle got into an accident on the 31 December 2021 and was written off by the insurance company on the same day. A new vehicle was purchased on the 29 May 2022 for N$300 000.00. The new vehicle has the same useful life and residual value as the previous one. INTANGIBLE ASSETS On 01 January 2022, TravelNam Ltd acquired control over OT Travels based in Walvis Bay. The transaction qualifies as a business combination as defined in IFRS 3. On this date, OT travels had two intangible assets: 1. Patent recognized already in terms of IAS 38 with a carrying amount of N$120 000 measured using the cost model and amortized over a period of 5 years. The fair value on this date amounted to N$ 150 000. 2. Research Costs incurred by OT Travels. The costs do not qualify as intangible assets in the books of OT Travels on 01 Jan 2022. Costs incurred by OT N$250 000. Fair value of the costs N$ 150 000. At 30 June 2022 The value in use for the Patent amounted to N$109 000 and the fair value less cost to sell amounted to N$ 110 000. On the same day 01 January 2022, TravelNam Ltd acquired a fishing Quota that will allow their clients to go on a fishing boat and experience the fishing process in the Namibian Sea. Cost of Fishing Quota N$ 200000 Total Useful Life 10 Years. On 30 June 2022, the fishing quotas had a fair value of N$240 000.00 in an active market of Namibian Fishing Industry. TravelNam elected to measure the Quotas using the Elimination method for revaluation. REQUIRED: a) Identify the performance obligations for the Valentines Packages 15 b) Allocate the transaction price to the identified performance obligations 10 c) Discuss if the options to remove the items listed on arrival at the hotel from the contract qualifies as a modification to the contract. 5 d) List the requirements for recognition of internally generated development costs. 10 e) Prepare journals to show the transactions above for TravelNam Ltd for the period ended 30 June 2022. Please show narrations. 1. Property Plant and Equipment (10) 2. Intangible Assets (10) 3. Impairment of assets (5) 25 f) Prepare notes, as they would appear in the Financial Statements of TravelNam Ltd as at 30 June 2022 for the below: Presentation and disclosure is considered Material. 1. Accounting Policies 2. Property Plant and Equipment (10) 3. Intangible Assets (10) 4. Impairment of assets (5) 25 g) Discuss the accounting treatment required by IAS 38 for internally generated Goodwill as opposed to Goodwill acquired from a business combination as defined per IFRS 3. Your discussion should include, initial recognition, Measurement, Subsequent measurement and deprecation. 10