The case explores how Hung Fook Tong Group Holdings Limited (1446.HK) a Hong Kong company engaged in the production and sales of a variety of herbal and non-herbal products under its “Hung Fook Tong (鴻福堂)” brand, accounts for its various membership programmes and promotional packages. Founded in 1986 by Mr. Wong Jing Fat, the Company has grown from a single herbal tea shop into a chain of 116 retail stores.
The case is set in the first quarter of 2019 before the release of 2018 annual results. Students take on the role of Colin Lo, the Financial Controller of the Company. Mr. Lo is preparing for the upcoming board meeting. He expects a detailed discussion on the impact of changes in accounting policies, in particular, HKFRS 15 “Revenue from Contracts with Customers”.
Accounting treatments for discounts and incentive sechemes