Telecommunications company Toronto Ltd signed a 15‐year deal to sell capacity on its cable network to a rival company for $200 million. The deal was completed on the last day of Toronto Ltd’s financial year, 30 June. The company received an upfront payment of only $20 million from its competitor on that day, but decided to recognize ‘revenue’ of $200 million for the financial year just completed.

Required

(a) Discuss fully how Toronto Ltd should account for the contract, justifying your answer by reference to relevant definitions, recognition criteria and relevant accounting standards?