MPERS and accounting for revenue

Section 23 of MPERS provides the requirements for accounting for revenue. Which of the following accurately describes those requirements?

The accounting for interest and dividend income have been removed from revenue recognition in MPERS

Accounting for construction contracts have been included in this section of MPERS and the treatment is similar to that in PERS

There are major changes in requirements of this section compared to the treatment of revenue under the PERS and MFRS frameworks especially in recognising sales of goods and services and recognition of interests and dividends

The revenue recognition for construction contracts is based on when risk and rewards id transferred to the customer

When the inflow of cash or cash equivalents in a sales transaction is deferred, and the arrangement constitutes in effect a financing transaction, how is the fair value of the consideration determined?

The fair value of the consideration is the present value of all future receipts determined using the risk-free interest rate

The fair value of the consideration is the face value of the transaction determined using an imputed rate of interest

The fair value of the consideration is the face value of the transaction

The fair value of the consideration is the present value of all future receipts determined using an imputed rate of interest

A financing transaction arises when, for example, an entity provides interest-free credit to the buyer or accepts a note receivable bearing a below-market interest rate from the buyer as consideration for the sale of goods. How can the imputed rate of interest be determined to compute the fair value of the consideration?

The prevailing rate for any instrument of an issuer with a similar credit rating

The prevailing rate for a similar instrument of an issuer with a similar credit rating, or a rate of interest that discounts the nominal amount of the instrument to the current cash sales price of the goods or services

A rate of interest that discounts the nominal amount of the instrument to the expected future cash sales price of the goods or services

The prevailing rate for any instrument of an issuer with a similar credit rating, or a rate of interest that discounts the nominal amount of the instrument to the expected future cash sales price of the goods or services

On 1.1.2016, XYZ Sdn Bhd sold goods for RM2,000,000 on two years interest-free credit when the current cash sales price of the goods was RM1,652,893. Since there is a difference between the cash price and the amount due under the two years of interest-free credit arrangement, the arrangement is in effect a financing transaction as well as the sale of goods. How is the difference between the cash price and the amount due in two years treated under MPERS?

XYZ must recognise the difference as revenue (or sales) over the two years calculated using the effective interest

XYZ must recognise the difference as deferred income in liability

XYZ must recognise the difference as interest revenue (or finance income) over the two years calculated using the effective interest

XYZ must recognise the difference as interest revenue (or finance income) over the two years determined on a straight line basis

On 1.1.2016, XYZ Sdn Bhd sold goods for RM2,000,000 on interest-free credit for two years when the current cash sales price of the goods was RM1,652,893. Since there is a difference between the cash price and the amount due under the two years of interest-free credit arrangement, the arrangement is in effect a financing transaction as well as the sale of goods. How should the transaction be recognised in financial year (FY) 2016 and 2017?

The revenue arising from the sale of goods is the current cash selling price of RM1,652,893 (i.e. the present value of the future payment) and balance of RM347,107 is recognised as deferred income for FY2016. There deferred income will be reversed in FY2017

The revenue arising from the sale of goods is the current cash selling price of RM1,652,893 (i.e. the present value of the future payment) and finance income of RM165,289 is recognised for FY2016 while finance income of RM181,818 is recognised for FY2017

The revenue arising from the sale of goods is the selling price of RM2,000,000 (i.e. the future value of the payment) is recognised for FY2016. There is no recognition for FY2017

The revenue arising from the sale of goods is the current cash selling price of RM1,652,893 (i.e. the present value of the future payment) and finance income of RM347,107 is recognised for FY2016. There is no recognition for FY2017

In some cases, as part of a sales transaction, an entity grants its customer a loyalty award or points that the customer may redeem in the future for free or discounted goods or services. In this case, the entity shall account for the award credits as a separately identifiable component of the initial sales transaction. How is this to be done?

The entity shall allocate the fair value of the consideration received or receivable in respect of the initial sale between the award credits and the other components of the sale. The consideration allocated to the award credits shall be measured at a nominal amount of RM1

The entity shall allocate the fair value of the consideration received or receivable in respect of the initial sale between the award credits and the other components of the sale. The consideration allocated to the award credits shall be measured by reference to their cost

The entity shall allocate the fair value of the consideration received or receivable in respect of the initial sale between the award credits and the other components of the sale. The consideration allocated to the award credits shall be measured by reference to their estimated fair value determined using a valuation technique such as discounted cash flow

The entity shall allocate the fair value of the consideration received or receivable in respect of the initial sale between the award credits and the other components of the sale. The consideration allocated to the award credits shall be measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately

Grocer Mart, a grocery store chain operates a customer loyalty programme. It grants programme members loyalty points when they spend a specified amount on purchase of groceries. Programme members can redeem the points for further purchases and the points have no expiry date. How should Grocer Mart recognise the customer loyalty points/awards?

Grocer Mart must recognise the consideration allocated to award credits as revenue when award credits are awarded. The amount of revenue recognised shall be based on cost of the goods expected to be exchanged or redeemed

Grocer Mart must recognise the consideration allocated to award credits as revenue when award credits are awarded. The amount of revenue recognised shall be based on the fair value or market price of the goods expected to be exchanged or redeemed

Grocer Mart must recognise the consideration allocated to award credits as revenue when award credits are redeemed and it fulfils its obligations to supply awards. The amount of revenue recognised shall be based on the number of award credits that have been redeemed in exchange for awards, relative to the total number expected to be redeemed

Grocer Mart must recognise the consideration allocated to award credits as revenue when award credits are redeemed and it fulfils its obligations to supply awards. The amount of revenue recognised shall be based on the nominal amount of RM1

Section 25 of MPERS prescribes the treatment of borrowing costs, whereby all borrowing costs are to be recognised as an expense in profit or loss in the period they are incurred. There is no option, whatsoever, for capitalisation. How is this different as compared to the treatment under the PERS framework?

Previously under PERS, while the benchmark treatment was to recognise all borrowing costs as an expense when incurred, there was an allowed alternative treatment. The alternative treatment permits the capitalisation of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset

Previously under PERS, while the benchmark treatment was to recognise all borrowing costs as an expense when incurred, there was an allowed alternative treatment. The alternative treatment permits the capitalisation of borrowing costs only in the case of property development activities

Previously under PERS, the benchmark treatment was to capitalise all borrowing costs

There is no difference between the treatment of borrowing costs under PERS and MPERS

The previous PERS framework did not prescribe any standard on related party disclosures. As such, related party disclosures in the financial statements were previously based on the requirements of the Companies Act 1965. Under MPERS, Section 33 has explicit requirements on the scope of related parties. Which of the following is NOT necessarily a related party under MPERS?

An entity, if one entity is a joint venture of a third entity and the other entity is an associate of the third entity

A person or a close member of the family if that person is a key management personnel of the reporting entity or of the parent; or has control or joint control or significant influence over the reporting entity

A customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business

An entity, if the entity and the reporting entity are members of the same group (parent, subsidiary and fellow subsidiary)

If an entity has related party transactions, it shall disclose at minimum the following -

The amount of the transactions, amount of outstanding balances (including their terms and conditions, including whether they are secured and the nature of the consideration to be provided in settlement and details of any guarantees given or received), and provisions for uncollectable receivables related to the amount of outstanding balances

The amount of the transactions, amount of outstanding balances (including their terms and conditions, including whether they are secured and the nature of the consideration to be provided in settlement and details of any guarantees given or received), provisions for uncollectable receivables related to the amount of outstanding balances, and the expense recognised during the period in respect of bad or doubtful debts due from related parties

The amount of outstanding balances (including their terms and conditions, including whether they are secured and the nature of the consideration to be provided in settlement and details of any guarantees given or received), provisions for uncollectable receivables related to the amount of outstanding balances, and the expense recognised during the period in respect of bad or doubtful debts due from related parties

The amount of the transactions, provisions for uncollectable receivables related to the amount of outstanding balances, and the expense recognised during the period in respect of bad or doubtful debts due from related parties

MPERS and accounting for revenue

Section 23 of MPERS provides the requirements for accounting for revenue. Which of the following accurately describes those requirements?

When the inflow of cash or cash equivalents in a sales transaction is deferred, and the arrangement constitutes in effect a financing transaction, how is the fair value of the consideration determined?

If an entity has related party transactions, it shall disclose at minimum the following -

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MPERS and accounting for revenue

Section 23 of MPERS provides the requirements for accounting for revenue. Which of the following accurately describes those requirements?

When the inflow of cash or cash equivalents in a sales transaction is deferred, and the arrangement constitutes in effect a financing transaction, how is the fair value of the consideration determined?

If an entity has related party transactions, it shall disclose at minimum the following -

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Test passed. Enter your details to download your certificate. Your certificate will also be sent to you by email.

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