Falcon Limited has a three-year contract, at the 31 December 2019 the outcome of the contract cannot be reliably estimated. The cost incurred to date is $12m, expected cost to completion is $168m and the contract price is $240m. The project is 16% complete. At this stage only 70% of the cost to date is deemed recoverable.

REQUIRED: For the financial year ended 31 December 2019 explain to the directors of the company in the form of a memo, how the above contract will be treated according to IFRS 15.

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