Cor pora te rep or ti n g

(1 marks)
 
(IFRS 15 knowledge: 2 marks max) 
Revenue should be recognised over time because the asset created by Music has no 
alternative use and they also have an enforceable right to payment for the work 
completed to date. 
(1 mark) 
The length of time between performance and payment is less than a year so there is 
not a significant financing component to the transaction. 
(1 mark) 
The fair value of the consideration received and receivable is $3.2 million ($1.2m + 
$2m).
(1 mark) 
Revenue of $2.24 million ($3.2m × 70%) should therefore be recognised in the 
statement of profit or loss. 
(1 mark) 
Music should recognise the equipment received at its fair value of $1.2 million and 
then depreciate it over its useful economic life of three years. 
(1 mark)
The depreciation charge in the current year will be $0.1 million (($1.2m/3) × 3/12) 
and the asset will have a carrying amount of $1.1 million ($1.2m – $1.1m). 
(1 mark) 
Music should recognise an additional asset on the statement of financial position of 
$1.04 million ($2.24m – $1.2m). 
(1 mark) 
This asset would be classified as a ‘contract asset’ rather than a ‘receivable’ because 
Music needs to complete its performance (or the customer needs to cancel the 
contract) before it is entitled to any payment.