On January 1, 2017, Build Company entered into a construction contract with following refinery. refinery specifications and changes to these specifications by the owner an owner to build an oil The contract has the characteristics; the oil is highly customized the owner's to are expected The oil refinery does not have an alternative use to Non-refundable, interim progress payments are required as a The owner can cancel the contract at any time (with a termination penalty); any work in process is the property of the to re-perform the tasks over the contract term. the contractor. mechanism to finance the contract. As a result, another entity would not need Physical possession owner. performed completion of the contract. single performance obligation to build evidences suggests that the contractor's performance creates the to date. and title do not pass until The contractor determines that the contract has a the refinery. The majority of an assets that customer controls and control is being transferred over time. Build concludes that input method (cost to cost method) instead of output method is for measuring the progress a reasonable method toward satisfying its more performance obligation. duration is 3 years with total estimated contract revenue of of December 31, 2017 is P200M. The contract P300M. The total estimated contract cost as The cost incurred during year 2017 120M including P20M related to as not represent/depict the transfer As of December 31, 2018, contractor-caused inefficiencies which do of goods or services to the customer. the total estimated contract cost becomes 250M due to increase in cost of raw cost incurred during 2018 is P105M including P5M related to not represent/depict the transfer materials. The contractor-caused inefficiencies which do of goods or services to the customer. Under IFRS 15, what is the net income/(loss) to be reported by the company for the years ended December 31, 2017 and 2018?
On January 1, 2017, Build Company entered into a construction contract with following refinery. refinery specifications and changes to these specifications by the owner an owner to build an oil The contract has the characteristics; the oil is highly customized the owner's to are expected The oil refinery does not have an alternative use to Non-refundable, interim progress payments are required as a The owner can cancel the contract at any time (with a termination penalty); any work in process is the property of the to re-perform the tasks over the contract term. the contractor. mechanism to finance the contract. As a result, another entity would not need Physical possession owner. performed completion of the contract. single performance obligation to build evidences suggests that the contractor's performance creates the to date. and title do not pass until The contractor determines that the contract has a the refinery. The majority of an assets that customer controls and control is being transferred over time. Build concludes that input method (cost to cost method) instead of output method is for measuring the progress a reasonable method toward satisfying its more performance obligation. duration is 3 years with total estimated contract revenue of of December 31, 2017 is P200M. The contract P300M. The total estimated contract cost as The cost incurred during year 2017 120M including P20M related to as not represent/depict the transfer As of December 31, 2018, contractor-caused inefficiencies which do of goods or services to the customer. the total estimated contract cost becomes 250M due to increase in cost of raw cost incurred during 2018 is P105M including P5M related to not represent/depict the transfer materials. The contractor-caused inefficiencies which do of goods or services to the customer. Under IFRS 15, what is the net income/(loss) to be reported by the company for the years ended December 31, 2017 and 2018?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PROBLEM 5:
Transcribed Image Text:On January 1, 2017, Build Company entered into
oil
a
construction contract with
an
owner
to
build
an
refinery.
The
contract
has
the
following
characteristics;
the
oil
refinery
is
highly
customized to
the
owner's
specifications and changes to these specifications by the owner are expected
The oil refinery does not have an alternative use to
Non-refundable, interim progress payments are required as
can cancel the contract at any
time (with a termination penalty); any work in process is the property of the
As a result, another entity would not need to re-perform the tasks
over the contract term.
the contractor.
a.
mechanism to
finance the contract.
The owner
owner.
performed
completion of the contract.
single performance obligation
evidences suggests that
to
date.
Physical
possession
and
title
do
not
pass
until
The contractor determines that the contract has
a
to build the
refinery.
The majority of
the contractor's performance creates an
is being transferred
assets
that
the
customer
controls
and control
over
time.
Build
concludes that input method (cost to cost method) instead of output method is
reasonable method for measuring the progress toward satisfying its
a more
performance obligation.
duration is 3 years with
estimated contract
cost as of December 31, 2017 is P200M.
including
represent/depict the
The
contract
total
revenue
of
P300M.
The total estimated contract
The
Cost
incurred
during
year
2017
as
120M
P20M
related
to
contractor-caused inefficiencies which do
not
transfer
of goods or
services
to
the customer.
As of December 31,
2018, the total
estimated
contract
cost
becomes
250M
due
to
increase
in
cost
of
raw
materials.
contractor-caused inefficiencies which do
The cost incurred during 2018 is P105M including P5M related to
not represent/depict the
transfer
of goods or services to the customer.
Under IFRS 15, what is
the net income/(loss)
for the years ended December 31, 2017 and 2018?
to be reported by the company
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