Reference no: EM132543884

ACCA Financial Reporting

Point 1: Pharma is a group of companies listed in the EU reporting under IFRSs. The company develops and makes a large portfolio of pharmaceutical products, both for the healthcare and beauty markets. Pharma's customers include hospitals, governments, pharmacies and retail parapharmacy and supermarket chains. The company has two divisions: Research & Development and Fabrication. In addition to working for the Pharma group, the Research & Development division also conducts research and development on behalf of smaller pharmaceutical companies and for governments.

Point 2: February 20X7 Pharma won a significant new contract to make large quantities of a generic drug for the government of a developing country. Under the terms of the arrangement with the government, payment is made on delivery in cash once customs have been cleared. Pharma bears the risks of shipping and will replace any shipment that is damaged or goes missing. The drugs will be delivered four times a year on 1 April, 1 July, 1 October and 1 January. The batches made for 1 April 20X7 and 1 July 20X7 were delivered and paid for successfully, although Pharma incurred significant costs in determining the customs arrangements for the first delivery. The 1 October batch was despatched prior to the year end, delivered and paid for on 1 October 20X7.

Required

Question 1: Explain the implications of the above information for the financial statements for the year ending 30 September 20X7.