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Entity T is a state owned entity. The Government has entered into an agreement with a foreign donor to carry out a project. They have decided that once the donor provides the funds to the Government, Entity T will be carrying out the performance obligations set out in the contract on behalf of the Government.
The project is for 2 years, with 10 separate performance obligations. For 2 of the obligations Entity T has to setup a Call Center on land provided by the Government, the agreement is setup in a way where the Government starts using the premises even if not fully completed. (Leading me to think these 2 could fall under over time?)
The rest of the obligations are made in a way where the Government can only obtain the benefits after Entity T completes the project and hands it over.
Entity T has currently calculated the potential revenue to be recognized based on two methods;
a) Input method (Cost)
b) Progress method (Based on percent of project completed)So my question is, under IFRS 15 how should the revenue be recognized?
In the exam, set out the relevant rules and then apply them.
RELEVANT RULE= recognise revenue at a point in time or recognise rule over time
If over time, can use – input or output (latter is stage of completion)
APPLICATION – (I think) over time – either a or b above is OK
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