Key Topics: Credit impaired loans, revenue recognition, inventories, overseas subsidiary, foreign exchange

Standards covered: IFRS 9 financial instruments, IFRS 15 revenue from contracts with customers, IAS 2 inventories, IAS 21 the effects of changes in foreign exchange rates

Description: You are required to explain how the client should account for the credit impaired loans in the financial statements, this question requires journal entry in your response setting out how to initially recognise the financial instrument and then also discuss the subsequent treatment. The scenario sets out two different transactions and you are required to explain how the revenue from the two contracts should be recognised, thinking about the performance obligations in question and when they are satisfied. Using calculations, you are expected to explain how the sale of certain inventories, need to be accounted for in the parent / group as well as an overseas subsidiary. You should consider the initial treatment of the transaction in the parent company and then subsidiary company individually and then consider the subsequent measurement for the purposes of the group accounts.