Question

The revenue for the following will be recognized upon delivery of the equipment and completion of...

The revenue for the following will be recognized upon delivery of the equipment and completion of installation.

Please explain why is it considered as asset liability approach under IFRS criteria.

1. delivery of equipment

2. installation

Business   Accounting   
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Answer #1

The asset-liability approach presumes the primacy of the determination of net assets (equity) at the balance sheet date. A contract generates assets and liabilities, and the goal is to depict them in the statement of financial position. Revenue and income are recognised as a result of changes in the values of these assets and liabilities. In essence, the recognition and measurement of contract assets and liabilities determine revenue recognition.

The Delivery & installation of the Equipment relieves the liability & creates an asset for the entity.

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