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I have problems with treatment to specialist plant in construction contract
1. In Question 2 June 2010 (Dune) only the carrying amount of the plant is used to calculated estimated profit
while in question of Pricewell 1 October 20X2 ( in BPP kit ) the cost of the plant is used
2. Is the depreciation of the plant used to calculate contract asset?
I dont know if I misnderstood any part of the question, is there anything relevant to the difference between ias 11 and ifrs 15?
Thanks in advanceYou have mis-interpreted the plant working
Plant cost $12 million, has a $3 million residual value so the cost of the plant that will be attributed to the contract is $9 million
Of that amount, $3 million is used up in the period from the start of the contract to the year end so that leaves the plant with a carrying value at the end of the year of $9
It’s an unfortunate question because the year end carrying value is exactly the amount of the cost of the plant attributable to the contract
If you use the 3 workings that are in the course notes (only the first 2 are applicable in Dune) then you’ll arrive at the same as the printed solution
“Is the depreciation of the plant used to calculate contract asset?”
Yes, it is. It’s a part of the calculation of “costs to date + attributable profit” from working W2
OK?
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