Chapter 1
Recognition and Measurement
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c) A large project for the installation of a server in a manufacturing facility with a cost of
$300,000 and revenue of $500,000 was completed on July 31, 2016. The full payment of
$500,000 for the project was received on July 31, 2016. Half the costs were paid in July and
the other half were paid in August. The accountant recorded the expense only in August
2016 when the amount was paid. Management approved this move as their bonuses
are based on a percentage of net income. Greg is unsure if anything is wrong with this
transaction.
d) The company has about $150,000 worth of old software on its books classified as
inventory with a cost of $150 per package. This software is three years old and is no
longer compatible with new operating systems. Management insists that this software
can be sold for at least $140 each but the last time one was sold was last year for $100.
The inventory continues to show on the books at $150,000 and Greg indicated that
management does not wish to make any changes. He himself is unsure what recognition
criteria under IFRS may be violated in this case.
