(1) On 1 April 2018 Panarea plc sold a package of products for £191,250 cash. The package was made up of equipment and 12 months of helpdesk support. The equipment normally retails at £175,000 and the support at £50,000. Revenue of £191,250 was recognized in the financial statements for the year ended 30 June 2018, on the grounds that the equipment sale had been made in that year and the provision of helpdesk support was part of that sale. 

(2) The following costs were incurred during the year on the development of a new factory: 

£ 

Construction costs 305,000 

Assembly and installation of equipment 42,000 

Allocated general overheads 39,000 

Architect’s fees 3,700 

Testing of equipment 1,800 

Recruitment of new employees 2,300 

Employee training 3,500 

The factory was ready for use on 1 April 2018. It has an estimated useful life of 15 years and is depreciated on a straight-line basis. 

(3) On 30 June 2018 a machine was identified as requiring maintenance work. The machine originally cost £60,000 on 1 July 2015 and had an estimated useful life of eight years at that date. An impairment review was carried out on 30 June 2018. On that date, the machine’s fair value was assessed as being £37,000 with selling costs of £500 and its value in use as £36,000. 

Requirement 

a) Explain the required IFRS financial reporting treatment for each of the three issues above, preparing all relevant calculations and discussing the impact on the financial statements of Panarea plc for the year ended 30 June 2018. 

b) According to the Conceptual Framework, what criteria must be met for an asset to be recognized in the statement of financial position?