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In applying the criteria of ‘over a period of time’, cd please explain each of the 3 crits as pertained to this question?
1. Simultaneous receipt/consumption of benefit …. i understand this
2. enhancement/creation of asset – how does it aplly here?
3. no other use and right to payment for work done to date – pls explain this too.one more question:
do all 3 criteria need to be satisfied or is satisfaction of one crit is enough?
regards
Hi,
It would be one of the three criteria as in this question it is the first point you make that is relevant.
The second point is referring to a construction contract whereby the asset is being constructed over a period of time and therefore the revenue recognised over the construction period.
The third one is similar to the second point above but covers a slightly different scenario whereby the asset is being constructed and it could be used for different purposes during the construction, possibly hired out to a third party, but if it isn’t then it has no other use and we will just be paid for the work that we are doing in constructing the asset for the purpose intended.
Don’t get too involved in the detail of the standard, just focus on the basics.
Thanks
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