Darlatt has built an offshore wind farm with the purpose of testing the efficiency of its prototype
Question:
Darlatt has built an offshore wind farm with the purpose of testing the efficiency of its prototype wind turbines. Darlatt has applied to the regulators for approval for production of its new prototype but has only received permission to test the prototype wind turbine. The wind farm development will enable Darlatt to test the reliability of the new wind turbines, which should assist in developing more efficient and cost-effective offshore wind turbines. As yet, however, there has not been any commercial production of the prototype wind turbines as there is still some slight doubt over the wind turbine’s durability in extreme weather conditions. The renewable energy generated during the testing phase of the wind turbines is sold to the national regulator of electricity. There is sufficient resource to complete the wind farm project, but the energy income has not been included in management’s resource planning.
Required:
The directors of Darlatt wish to know how the expenditure on the wind farm and the income from the sale of energy should be treated in the financial statements.
Step by Step Answer:
International Financial Reporting And Analysis
ISBN: 9781473766853
8th Edition
Authors: David Alexander, Ann Jorissen, Martin Hoogendoorn