Question 5 During the year ending 30th April 2020, Borg plc entered into a contract to build a factory for a price of 1,000,000, plus a performance bonus of 100,000 if the factory was complete by 31st March 2021. The contract met the criteria for revenue to be recognised over time. Due to delays caused by poor weather the directors of Borg did not expect to complete the factory by 31st March 2021. Where relevant, Borg plc measures completion based on an independent valuer. The following information relates to the contract as at 30th April 2020: Costs incurred to date 600,000 Estimate of the costs to complete the contract 200,000 Value of work certified by independent expert 750,000 Amounts invoiced to date 665,000 Requirements IFRS 15 contains three criteria regarding when revenue should be recognised over time as opposed to at a point in time.

State any TWO of the three criteria. (2 marks)

Explain how the directors should treat the performance bonus with respect to revenue recognition.

(2 marks)

Prepare the relevant Statement of profit or loss and Statement of financial position extracts in respect of the above contract for the year ended 30th April 2020. (6 marks)