How should DigiFlow recognize the revenues from this plan in line with IAS 18

finance

Description

Question 1 

Garland enters a 12-month telephone plan with the local mobile operator DigiFlow. The terms of the plan are as follows: 

o Garland’s monthly fixed fee is $100. 

o Garland receives a free handset at the inception of the plan.


DigiFlow sells the same handsets for $300 and the same monthly prepayment plans without handset for $80/month


(a) How should DigiFlow recognize the revenues from this plan in line with IAS 18? 


(b) How should DigiFlow recognize the revenues from this plan in line with IFRS 15? 


Question 2

 A. On 1 March 2019 Stubbs Company acquired a machine from TCI Machines Ltd., under the following terms


In addition to the above information Stubbs Company was granted a trade discount of 10% on the initial list price of the asset and a settlement discount of 5% if payment for the machine was received within one month of purchase. Stubbs Company paid for the plant on 25 March 2019 


Required 

a. Calculate the total amount to be capitalized as PPE according to IAS 16 (10 marks) 

b. Explain the treatment of all items not included in the calculation above

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