Solid Structures Limited develops real estate in Lekki, Lagos. The entity enters into a contract with a customer. The entity will sell a two storey building for ₦800,000 to the customer. Both parties signed the contract, which was witnessed by their respective legal counsel. The customer intends to relocate an established contemporary music school to the newly acquired building. The customer has 15 years of experience in the contemporary music education industry. The customer’s contemporary music school has net assets worth ₦3,300,000. There is high demand for education in contemporary music.
Solid Structures Limited has a ‘no refund policy for initial deposits paid by clients. The customer pays an initial deposit of ₦600,000 and enters into a one-year financing agreement for the outstanding 25%. Based on the one-year financing agreement with Solid Structures Limited, the customer will pay out of the cash inflows generated by the school in the next one year. If the customer fails to actualise the payment, the 25% is to be paid from the net assets of the contemporary music school.
Can Solid Structures Limited account for the contract with the customer within the scope of IFRS 15?
See the suggested answer to practice activity 13.3
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