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For this question (a) (i) first issue in the scenario, my own answer is recognise $350,000 for provision as unavoidable cost.
For the answer “Per IFRS 15, costs should only be recognised as an asset if they are expected to be recovered”Why cost become asset when it can be recovered? Is it means the provision is reduced if it can be recovered and it recognise as asset instead of direct deduct from provision.
“The recoverable portion of the($200,000) will continue to be recognised as an asset”
The words ‘continue to be recognised’ is it means it originally have recognised as an asset? If so, why forecast profit is recognised as an asset? The contract has not compete yet.And per the answer $350,000 will be recognised as an an unavoidable cost – but this is offset against the profit initially expected on the contract so the net cost is $150,000.
The company (Bill) develops properties – so when it incurs costs on the development of a property to a customer’s specification (i.e. IFRS 15 is the relevant standard) – it is not an expense in Bill’s profit and loss but a contract asset – it will be recovered from the customer. This is assumed knowledge of FR/(F7) and SBR/(P2).
I cannot comment on the continued recognition of $200,000 as an asset. I think this is a “hangover” from how this has been adapted from when IAS 11 was the relevant standard. You would have to ask BPP to comment/clarify or otherwise ignore.
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