IFRS 15 Loss making contract confusion with IAS 37 Onerous contract provision

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January 26, 2024 at 1:24 pm #699116
PosedionNoob
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In the video lecture pertaining to the revenue recognition of a loss making contract (https://www.youtube.com/watch?v=F0sWlGlEGCE), the tutor explained that in case of a lose making contract, as per Prudence concept the entire loss would be recognized.
However, my question is wouldn’t the probable loss in contract make it onerous? So a provision of an equal amount would be created as per IAS 37 Provision, Contingent Liabilities and Assets instead of reporting the loss.
I would be grateful if you could provide with appropriate reasoning and details for this problem. Also if you can help me with relevant sections of the standard explaining the same?
March 4, 2024 at 3:55 pm #701946
fredymaila
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Hello.
By year end, you would have recognised revenue and cost of sales, the difference of which is part of the entire loss.
So, recognise the residual loss too in the SOPL and take it as a onerous contract provision.
Hope you got it!
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