Construction contract – How 2 best account for it in IFRS 15

A construction contract is a contract specifically negotiated for the construction of (a combination of) assets that are closely interrelated in terms of design

Legally enforceable contract

Legally enforceable contract - A contract, under the broadest possible definition, is a legally enforceable promise. Contracts are classified in many different ways.

IFRS 15 Create or enhance an asset

IFRS 15 Create or enhance an asset is the second phase for IFRS 15 Revenue recognition. This is part of a primary and fundamental subject in the recognition of revenue. There are two ways of recognising revenue, revenue recognition over time and revenue recognition at a point in time. Revenue recognition over time is often referred to as the ‘Percentage of completion‘ method under the (superseded) IAS 11 Construction contracts. IFRS 15 Create or enhance an asset

The general principle is the revenue is recognised at a point in time (and as such it is the most common type of sales transaction at least in volume, just think of: a retailer sells a candy bar for … Read more