Question

A construction company has received a construction tender that expires in four years. The tender price is 700 thousand pounds and the cost of the company operating will be 540 thousand pounds. By the end of the first year, 180 thousand pounds of cost work was done, while the tender-giving authority was reported to have a right fulsome of 162 thousand pounds. By the end of the first year, the company estimates it will be spent to complete another £400,000 business. In the second year 200 thousand pounds was spent de facto, 230 thousand pounds was reported to be entitlement. At the end of the second year, it is estimated that £190,000 will be spent on the remainder.

According to IFRS and tax legislation, how many pounds will be the profit figures to be announced in the second year? Explain why you're aware.

Answer 1

As per ifrs 15 revenue from contract we will solve the same We will use % of completion method to recognize this revenue If during period organization estimate loss it should be immediatley reported Amount in thousands 1st year 2nd year cumulative Cost incurred 180 200 380 Estimated cost 400 190 Total Cost 580 570 Percentage of completion 31.03% 66.67% Revenue to be recognized as per ifrs 217.2414 249.4253 percentage of completion = cost incurred/(Cost incurred + estimated cost) revenue to be recongnized 1st year= Tender price* percentage of completion 2nd year= (Tender price* percentage of completion) - Revenue recognized in year 1

The tax treatment is determined separately per jurisdiction. Hence, to properly assess the income tax (accounting) effects of IFRS 15, an entity needs to perform an assessment on a jurisdiction level. It should be assessed per jurisdiction what the accepted tax treatment is. The timing of revenue recognition for tax purposes may differ with the revenue recognition under IFRS 15. If so, (additional) temporary differences arise which should be reported for in the financial statements in line with IAS 12. So by looking at question we should disclose income of 190 thousand for the tax puropose and difference between tax as per book and as per tax should be disclosed as timing difference

Hey! hope your query get solved and if not then raise your query i would love to solve the same . and please dont forget to rate my answer. and please write a feedback which help me to serve you better.