MPERS and accounting for revenue

Multiple-choice questions: In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again

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

  2. 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?

  3. 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?

  4. 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?

  5. 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?

  6. 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?

  7. 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?

  8. 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?

  9. 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?

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