BC2 Views differed on what an entity should include in the cost of fulfilling a contract when assessing whether the contract is onerous - whether to include:
(a) only the incremental costs of fulfilling the contract - for example, the cost of materials and labour required to construct a building; or
(b) all costs that relate directly to the contract - both the incremental costs and an allocation of other costs that relate directly to fulfilling contracts - for example, an allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract among others, or an allocation of the costs of management and supervision of contracts.
BC3 The Board decided to require an entity to include all costs that relate directly to a contract. The Board concluded that:
(a) including all such costs provides more useful information to users of the entity’s financial statements (paragraphs BC4-BC7);
(b) the benefits of providing that information
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