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Hello sir,
Can you tell me how we treat pre sales contract?
Do we provide provision?
Which ias is applied in?Regards,
KunalIs there any legal or constructive obligation involved whereby the “borrower” definitely will have to pay?
In which case, if we have the obligation to pay, it should be recognised at its present value
Does this obligation give us any rights of use over the asset? Is this really a kind of lease contract?
This looks to me like we should be treating it as a leased asset.
Next question … does this contract satisfy he criteria for classing the agreement as a finance lease? In which case, capitalise the present value of the minimum obligation payments and depreciate the asset
If it doesn’t satisfy the criteria for classification as a finance lease, then expense the obligated payments each year until those payments fall due for settlement
Ok?
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