CERTYNEX IFRS ACADEMY

Cassiopée manufactures equipment under a firm contract. Its internal auditor argues that the equipment has an alternative use, since if the customer terminated the contract, Cassiopée could sell it to someone else. Which principle applies?

The argument is valid: the mere possibility of termination is enough to establish an alternative use.

The possibility of termination is not considered; only restrictions and limitations on redirecting the asset matter.

The assessment depends on the probability of termination estimated by management.

Alternative use is assessed solely on the basis of the physical stage of completion of the equipment.