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Hi Sir
Need your opinion on thisContract costs
IFRS 15 provides a guidance about two types of costs related to the contract:Costs to obtain a contract
Those are the incremental costs to obtain a contract. In other words, these costs would not have been incurred without an effort to obtain a contract – for example, legal fees, sales commissions and similar.These costs are not expensed in profit or loss, but instead, they are recognized as an asset if they are expected to be recovered (the exception is the contract costs related to the contracts for less then 12 months).
Costs to fulfill a contract
If these costs are within the scope of IAS 2, IAS 16, IAS 38, then you should treat them in line with the appropriate standard.If not, then you should capitalize them only if certain criteria are met.
My question is
cost incurred to date in construction contracts does include Both cost or just cost of fulfilling?
Normally the cost to date that are recognised would be the cost of fulfilling. It’s almost unheard off to capitalise the costs of obtaining a contract.
so we recognize them as contract assest if they are expected to recover? cost incurred to date include only cost of fulfilling.
Here sir I would like to Draw your attention to crowd funding article.
they are including sales common paid to PeddleStarter crowdfunding platform in cost incurred to date recognize as profit.
“However, Burnett Co expects to recover the costs incurred in satisfying the performance obligation, thus it will recognise revenue to the extent of the costs incurred to date $520,000 ($240,000 + commission $280,000) as at 31 December 20X9”
Please clarify.
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