CERTYNEX IFRS ACADEMY

Grenadel has firmly committed to buy 2,000 tonnes of wood pellets at the agreed fixed price, for delivery in 20X6; no delivery or payment has taken place at 31 December 20X5. The market price has risen slightly and the pellets will be resold at a margin. What should be concluded at the reporting date?

A provision for the full purchase commitment must be recognised.

A contingent liability must be disclosed for the purchase commitment.

The contract is executory and not onerous: it is outside the scope of IAS 37.

A contingent asset must be disclosed for the rise in the market price of pellets since signature.