Page 25 - CIMA May 18 - MCS Day Tasks

ADVANCED FINANCIAL REPORTING (F2) ‐ PRACTICE TASKS

TASK 3 – GOVERNMENT SUBSIDIES AND REVENUE RECOGNITION

Trigger and task

You receive the following email

From: Leena Forzani (Sales and Marketing Director)

To: Financial Manager

Subject: Receipt of government subsidies and revenue recognition

I have just come from a meeting with colleagues from my department which considered pricing
issues for tickets on particular routes.

As you know, we are not accountants, but I feel that we would benefit from having some
understanding of how subsidies are accounted for in the financial statements, and how revenue is
recognised in the financial statements. This may inform our judgement when setting fares on
individual routes and also help us to factor‐in the receipt of any related subsidy.

Please draft some briefing notes that I could circulate to members of my team that explain the
following:

 Firstly, the accounting requirements relating to the receipt of subsidies. Your notes should
indicate the practical issues of accounting for subsidies, including potential repayment to
government authorities.
 Secondly, the accounting treatment relating to recognition of revenue for point‐of‐sale
transactions, advance bookings and multi‐ride or season tickets.

Thanks

Leena

Prepare a response to Leena’s request. (45 minutes)

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