Financial Statistics: Revenue Recognition, Sales and Marketing Fees, Contract Liability, IFRS Criteria, Bad Debt Provision

Running head: FINANCIAL STATISTICS
Financial statistics
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Name of the university
Student ID
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1FINANCIAL STATISTICS
Table of Contents
Answer 1....................................................................................................................................3
Answer 2....................................................................................................................................3
Answer 3....................................................................................................................................4
Answer 4....................................................................................................................................4
Answer 5....................................................................................................................................4
References..................................................................................................................................6

2FINANCIAL STATISTICS
Answer 1
New rules for revenue recognition issued by IFRS that is applicable for the public
companies from 1st January 2019 and for private companies from 1st January 2019 have
significant implications for the franchisors. It requires attention of the franchisors as well as
their accountants to necessitate the consideration in coming years. In the given case, FRU has
2 promises to transfer the services or goods – (i) promise to grant the license and (ii) promise
to transfer the equipment. This is due to the fact that NOC can be benefitted both from using
the franchise agreement for operating MF outlet and using the equipment. FRU determines
that transaction price includes fixed consideration amounting to $ 380,000 and variable
payment of $ 50,000 each at the end of 6 years. The consideration of $ 50,000 will be
allocated to entire period of 6 years. In addition to the license FRU delivered equipment to
NOC, market value of which is $ 475,000 and delivery of equipment is distinct obligation.
That is stand alone selling price of equipment is $ 475,000 and FRU regularly franchises the
license in exchange for the payment of $ 50,000 (Franchise.org 2019). Hence, the receipt of
franchise fees shall be entirely allocated to the performance obligation for granting the usage
of MF outlet and it shall allocate to revenue for equipment sales and for providing start up
assistance obligation as initial obligation for –
(b) $ 475,000
Answer 2
Annual sales and marketing fees are recognized as the sales occur and are accrued for
the fees earned bt not received yet. Hence, in the statement of comprehensive income for the
year ended December 31, 20X3, FRU shall recognize the sales and marketing fees as –