Ifrs 15 revenue from contracts with customers

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Reference no: EM133206154

Problem:

Flying Power Limited entered into two separate service contracts with two customers:

DESCRIPTION

CUSTOMER A 

CUSTOMER B 

Contract Inception 

1 January 20x6 

1 January 20x6 

Contract price (at inception) 

R200 000 

R600 000 

Rebate (price reduction) 

R80 000 (note 1&2) 

Various (note 3&4) 

Service duration 

2-month period 

3-month period 

Services provided 

January & February 

January & February 

Amounts paid as at 28 February 20x6 

R140 000 (note 2) 

None 

At contract inception, Flying Power Ltd expected that customer B would provide a BEE certificate proving a Level 1 contribution. This certificate was expected before 20 February 20x6. 

Note 4: Customer B presented the necessary documentation on 18 February 20x6 (before the deadline has expired). Upon analysis thereof, it was determined that customer B was actually a Level 2 contributor.

Required:

a) Show the journals that Flying Power Ltd must process relating to the information presented above(relating to both customers A & B)for the 28 February 20x6 financial year.

b) Provide an explanation for your journals with specific reference to IFRS 15 Revenue from Contracts with Customers.

Reference no: EM133206154

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