A well-known Australian airline has placed a non-cancellable order for a new Airbus A380. The price between the airline and the manufacturer is fixed, and delivery is to occur in 24 months with full payment to be made on delivery.

Required

A. Should the airline recognise an asset or liability at the time it places the order? Discuss in line with the Conceptual Framework definitions of assets and liabilities.

B. One year later, the price of the Airbus A380 has risen by 6%, but the airline had locked in its contract at a fixed, lower price. Under the Conceptual Framework, should the airline recognise any asset (and income) at the time of the price rise? If the price fell by 6% instead of rising, should the airline recognise a liability (and expense) under the Conceptual Framework?