Question 4 - Set up

In this lesson

1. 0:00 Question overview and requirements
2. 1:02 Part A: Revenue recognition requirements
3. 2:27 Gift cards revenue accounting
4. 2:31 Royalty fees and credit risk
5. 3:47 Part B: Investment property accounting
6. 4:42 Approaching the question strategically

About this lesson

You'll work through a 25-mark, 45-minute question involving Kiki Company, a toy manufacturer, where you'll need to advise on revenue treatment, evaluate how accounting policy choices affect investor perception, and analyse financial performance using key ratios. The first part of the question focuses on revenue recognition. You'll examine how to account for $50 gift cards with a 12-month expiry and an estimated 70% redemption rate, then address royalty income from a licensing agreement where the licensee has experienced cash flow difficulties and stopped payments mid-year. Both scenarios require you to apply IFRS principles to determine when revenue should be recognised and how to handle uncertainty. The second part asks you to discuss how the choice between fair value and cost models for investment property accounting could influence investor analysis of Kiki's financial statements. This requires you to explain both measurement approaches under IAS 40, then link your analysis to key financial performance ratios to show how each policy choice would affect how investors interpret the company's position and performance. The question is designed to be tackled in any order. Allow roughly five minutes to read and understand the exhibits, then allocate the remaining 40 minutes to writing your answers. Two professional marks are available for part B, so ensure your response demonstrates clear communication and structured thinking alongside technical accounting knowledge.

Duration: 5m