Contract asset
An entity presents a contract asset when it has performed but its right to payment remains conditional, for example on completing another obligation. Once only the passage of time separates it from payment, the right is a receivable. Assess contract assets for expected credit losses under IFRS 9. Present a contract’s net position in accordance with IFRS 15 and distinguish the contract asset from both inventory and a receivable.
Worked example
A contractor transfers a completed design worth 40,000, but cannot invoice until a separate installation milestone is completed. Assuming the contract terms make the right to the 40,000 conditional on that milestone, a contract asset arises after the design transfers.
Common mistake
Treating every unbilled amount as a contract asset: a right can already be unconditional even if an invoice has not yet been issued.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |