Steady Limited is an engineering firm that enters into a contract with the Government to build a Tanker Terminal where tankers will be safely parked for a fee. The transaction price is agreed at ₦890,000. The contract was approved in writing. The Government pays a mobilisation fee of ₦224,100 and enters into a 2-year financing agreement for the remaining ₦665,900 which will be paid from the income generated from the first year operation of the Tanker Terminal.
If the customer fails to actualise the payment, Steady Limited is entitled to compensation of a non-refundable 1 percent of the outstanding amount and cannot seek further compensation. Also, the mobilisation fee is non-refundable.
Does the contract meet the IFRS 15 criteria for accounting for a contract with a customer?
See the suggested answer to practice activity 13.5 here.
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