Soorya Manufacturing makes educational toys that are sold to retailers on the following terms: Each type of toy has a fixed wholesale price, is shipped F.O.B. shipping point, and payment is due 45 days after the shipment. The retailer may return a maximum of 45% of an order at the retailer's expense up to 6 months after delivery. Sales are made only to retailers that have a good credit rating. In Soorya's 11 years of existence, the company has experienced a return rate of approximately 15%, a bad debt expense of 5% of sales and an average collection period of 90 days.
Soorya provides a bonus to its senior managers based on annual revenues, net of returns.
Required:
a)Identify four different points in Soorya's value creation process that could be used for recording revenue.
b)What are the basic revenue recognition criteria under IFRS?
c)Discuss the pros and cons for two alternative recognition points mentioned in point (a). Remember to support your reasoning with case facts.
d)Recommend the recognition point that Soorya should use in its financial statements.
e)Explain why this is or this is not a consignment sales transaction.
f)Explain why this is or this is not an installment sales transaction.

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The Answer of Soorya Manufacturing makes educational toys that are sold to retailers on the following terms: Each type of toy has a fixed wholesale price, is shipped F.O.B. shipping point, and payment is due 45 days after the shipment. The retailer may return a maximum of 45% of an order at the retailer's expense up to 6 months after delivery. Sales are made only to retailers that have a good credit rating. In Soorya's 11 years of existence, the company has experienced a return rate of approximately 15%, a bad debt expense of 5% of sales and an average collection period of 90 days.
Soorya provides a bonus to its senior managers based on annual revenues, net of returns.
Required:
a)Identify four different points in Soorya's value creation process that could be used for recording revenue.
b)What are the basic revenue recognition criteria under IFRS?
c)Discuss the pros and cons for two alternative recognition points mentioned in point (a). Remember to support your reasoning with case facts.
d)Recommend the recognition point that Soorya should use in its financial statements.
e)Explain why this is or this is not a consignment sales transaction.
f)Explain why this is or this is not an installment sales transaction.

Soorya Manufacturing Makes Educational Toys That Are Sold to Retailers