Question
An entity sells a factory building held for 20 years.
The legal title transfer occurs on 30 September; economic control passed and risks transferred on 15 September when buyer took possession and started using it. The buyer paid full consideration on 10 October. When should the seller derecognise the building and recognise profit or loss?Solution
Derecognition is when substantially all risks and rewards of ownership are transferred. Economic control transfer (possession/use) on 15 Sep indicates derecognition then, regardless of legal title timing or cash receipt (subject to contract specifics).
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