Kringle Company has agreed to provide services to North to South Plc in exchange for a piece of equipment and a cash payment.The equipment is currently recorded in North to South's books at €73 000 but independent assessors have set the fair value at €65 000.The cash payment of €20 000 will be received 12 months after completion of the services.Kringle should record revenue as:

Question

Quizplus · Accepted Answer

According to IFRS 15 Revenue from Contracts with Customers, revenue should be recognized when control of the goods or services is transferred to the customer. In this scenario, Kringle is providing services in exchange for a piece of equipment and a cash payment.

For the equipment, Kringle should recognize the revenue at fair value, which is €65,000.

For the cash payment, Kringle should use the time value of money and recognize the revenue at the present value of €20,000. Therefore, the revenue recognition will be €65,000 plus the present value of the €20,000 cash component.

Therefore, the correct answer is D.

Kringle Company Has Agreed to Provide Services to North to South