In late 2018, Daisy Company entered into a noncancelable purchase contract for which the contract price is now greater than the market price, and Daisy expects that losses will occur when the purchase is executed in early 2019. Under IFRS, Daisy should recognize a liability and corresponding loss in 2018.

Question

Quizplus · Accepted Answer

Under IFRS, when there is evidence of a loss on a noncancelable purchase contract, a liability and corresponding loss should be recognized in the financial statements in the period in which the evidence of the loss becomes apparent. Therefore, in this scenario, Daisy should recognize a liability and corresponding loss in 2018, even though the purchase will not be executed until 2019.

In Late 2018, Daisy Company Entered into a Noncancelable Purchase