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QUESTION 1 (6 marks) Brelle Ltd is a well-established company in the construction of roads...

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Accounting

QUESTION 1 (6 marks)

Brelle Ltd is a well-established company in the construction of roads and has a great track record of successfully fulfilling its construction. On 3rd December 2021, it signed a deal with the government to construct a freeway. Construction will commence on 1st January 2022. After construction is completed, the road will be a toll road and Brelle Ltd is given the rights that entitle it to obtain the toll charges for the following 20 years. Given the long horizon, the 2 experts hired by Brelle Ltd cannot reach a consensus on the expected toll receipts. One expert predicts Brelle Ltd to collect $130 million per year while the other predicts $200 million per year. No other predictions are available.

Required:

Should the expected toll receipts be recorded as an asset in Brelle Ltds Balance Sheet at the end of December 2021? Explain, using the definition and recognition criteria of asset in your explanation.

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