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Hello sir,
IFRS 15 states that costs incurred in fulfilling a contarct which are not in scope of another standard shoudl be recognised as an asset only when it relates directly to contract, enhance economic benefit and cost are expected to be recoverable.My question is I’m not sure how do we account for this? For example, direct cost that meet the criteria is $50.
Do we debited contract asset $50 and credited cash (example) $50.
And how do we derecognise it? does it reduce the revenue?Is it relevant and appropriate? I am not so sure about the cost treated as contract asset?
Does it have seperate calculation from contract asset arising from revenue recognised to date minus amount invoiced to date? If not, where did we put the contract asset in that calculation?
Spend 50 on contract, DR CONTRACT ASSET CR CASH
When sale is recorded DR COS CR CONTRACT ASSET
As you say there could also be a contract asset if you have not yet invoiced an amount of revenue recognised – but I suspect you might call it a receivable:
“A receivable is recognised when the entity’s right to consideration is unconditional except for the passage of time.” Source – ias plus
Always better to focus on question practice rather than theory.
🙂
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