Discuss in terms of the Conceptual framework for financial reporting, whether the payment to Moving Target Ltd can be recognised as an asset in the financial statements of Shoppers Delight Ltd for the year ended 30 June 2020.
Shoppers Delight Ltd is a retailer operating in the fast-moving consumer goods industry, and its financial year end is 30 June.
Due to the COVID-19 social distancing requirements, businesses have to ensure they limit the number of customers entering into their stores. A digital signage solution company, Moving Target Ltd, has developed a technology that counts the number of customers.
The ‘digital footfall counter’ keeps track of the number of customers entering and leaving the store and that number is compared to the stores’ capacity. The counter monitors the number of customers entering and leaving the premises and works together with digital signage which communicates to waiting customers, what the stores’ capacity is at any given time.
Shoppers Delight Ltd placed an order for the digital footfall counter together with the digital signage, which can be purchased as a package, for all its stores in the country on 25 May 2020. It paid R75 000 on the date the order was placed. The delivery and installation of the digital counter and signage was 10 July 2020.
Required:
Discuss in terms of the Conceptual framework for financial reporting, whether the payment to Moving Target Ltd can be recognised as an asset in the financial statements of Shoppers Delight Ltd for the year ended 30 June 2020.
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