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I learnt that contract to deliver brick and contract to build a wall is considered single contract. But it is considered seperate performance obligation?
If not, how should we account for this as it is performance obligation over time? What if the situation is entity already delivered all the brick but only completed 50% building a wall?
For example, revenue is 20m (Brick 5m and Build wall 15m). The cost incurred at time is 8.
The stage of completion is 50%. Does the revenue recognised to date is 22.5m (5m + 7.5m) or 10m (59% from total revenue).Thank you.
Brick and construction may or may not be separate PO – you would need to study the contract. Could the customer have bought the bricks from you and the construction from someone else? If so, answer might be 12.5, but, in practice, I would ask a surveyor.
You cannot recognise revenue over time just because the contract ‘takes time’. You can only recognise revenue over time if:
the customer simultaneously receives and consumes all of the benefits provided by the entity as the entity performs; OR
the entity’s performance creates or enhances an asset that the customer controls as the asset is created;
OR the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. (Source iasplus)
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