A contract between Works Limited and the Mercy State to build a hospital in the State was signed by both parties on 10 January 2018. The consideration for the contract was ₦568,900. Another contract between both parties was signed on 2 March 2018 to build two roads linking the hospital to two communities in the outskirts of the State. The consideration for this contract was ₦300,000. The construction of the two roads is expected to commence once the first contract is at 80% stage of completion.
The payment for the first contract is to be made as follows:
First payment ₦368,900
Second payment ₦100,000 (at 80% stage of completion)
Third payment ₦100,000 (at completion)
The payment for the second contract is to be made as follows:
First payment ₦180,000 (at 80% stage of completion of the first contract)
Second payment ₦60,000 (one month from the first payment)
Third payment ₦60,000 (one month from the second payment)
Required: Based on IFRS 15, should Works Limited combine the first and second contract?
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