CONTRACT COSTS

Question 1

How is recognised the incremental costs of obtaining a contract with a customer?

Answer 1

• recognize the incremental costs of obtaining a contract with a customer as an asset if the entity expects to recover those costs.
  -Includes costs that it would not have incurred if the contract had not been obtained
  -Asset is amortized on a basis that reflects the transfer of the goods or services to the
  customer.
• recognise the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognised is one year or less.

Question 2

How are recognised costs that would have been incurred rerdless of whether the contract was obtained?

Answer 2

Costs that would have been incurred regardless of whether the contract was obtained shall be recognised as an expense when incurred, unless those costs are explicitly chargeable to the customer.

Question 3

When an entity shall recognise an asset from the costs incurred to fulfill a contract?

Answer 3

If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard and if:
- the costs relate directly to a contract or to an anticipated contract that the entity can specifically identify;
* the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and
* the costs are expected to be recovered