Page 544 - F2 Integrated Workbook STUDENT 2019

F2: Advanced Financial Reporting

7.5 C

When the outcome of a contract to create a controlled asset for a customer is
uncertain (i.e. the contract is in its infancy and it is uncertain whether overruns
will arise or whether a profit will be made), IFRS 15 states that no profit should
be recorded and that revenue should only be recognised up to the amount of
costs incurred to date that are expected to be recoverable from the customer.

Therefore, recoverable costs in this construction contract are $50,000. Revenue
can only be recognised to match = $50,000.

7.6 C
The contract signed by Salah includes one performance obligation - to redesign
the VVD branches.

The price of the contract will include the cash received of $850,000, the fair
value of the shares of $150,000 ($1.50 × $100,000) and the variable
consideration of $150,000, giving a total transaction price of $1,150,000. Option
A is true.

The non-cash consideration will be valued at fair value at the point the contract
is signed so will be valued at $1.50 per share when allocating the price of the
contract. Option D is true

The variable consideration is considered to be highly probable due to Salah’s
experience and timely reputation so is included in the transaction price.

The contract sees the enhancement of a controlled asset so revenue will be
recorded over time. Option B is true.

Revenue recorded by the date of completion for each renovation will be
recorded at $1,150,000/5 = $230,000. Option C is false.

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