to sell one of its machines to Orzo for £955,000 with payment on completion in two years. Alternatively, Orzo can pay £850,000 on signing the contract. The difference in price is equivalent to a 6% borrowing ra
Fusilli plc operates a business building and selling high-tech specialised machinery that takes
two years to build. Delivery and legal title to the machinery passes to the customer once
construction is complete.
On 1 October 2020 Fusilli entered a contract to sell one of its machines to Orzo for £955,000 with
payment on completion in two years. Alternatively, Orzo can pay £850,000 on signing the
contract. The difference in price is equivalent to a 6% borrowing rate. The customer decides to
pay up front, and pays £850,000 on 1 October 2020
Fusilli has a 30 September 2021 year end.
(i) When should Fusilli recognise the revenue on this contract? Explain your rationale.
(ii) Determine the amount that IFS 15 would consider to be the transaction price of the
contract.
(iii) How should the difference between the two contract prices be accounted for in the
Statement of profit or loss and
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