An airline places a non-cancellable order for a new airplane with one of the major commercial aircraft manufacturers at a fixed price, delivery in 30 months, payment in full to be made at delivery.
(a) Under the Conceptual Framework, do you think the airline should recognise any asset or liability at the time it places the order?
(b) One year later, the price of this airplane model has risen by 5%, but our airline had locked in a fixed, lower price. Under the Conceptual Framework, do you think the airline should recognise any asset (and gain) at the time when the price of the airplane rises? If the price fell by 5%, instead of rising, do you think the airline should recognise a liability (and loss) under the Conceptual Framework?