CERTYNEX IFRS ACADEMY

Linéo is building four assembly lines in a manufacturer's plant, and the manufacturer controls the work in progress as it is performed; the contract is a single obligation satisfied over time. At 31 December 20X1, one line is complete and delivered, and two others are almost finished in the customer's plant. The finance director proposes measuring progress by lines delivered, that is 25%. What is your assessment?

Measuring by lines delivered is always suitable, since any output method is permitted by the standard.

It is not suitable: it omits significant work in progress controlled by the customer.

No revenue can be recognised before the last line is delivered, as there is a single obligation.

Lines delivered and costs incurred on lines in progress must be combined, and the two measures added together.