Solution

While evaluating the pattern of transfer of control to the customer, the Company shall evaluate conditions laid in para 35 of IFRS 15 as follows:

•          Criterion (a) – whether the customer simultaneously receives and consumes the benefits: Customer can benefit only when the satellite is fully constructed and no benefits are consumed as it’s constructed. Hence, this criterion is not met.

•          Criterion (b) – An asset created that customer controls: As per provided facts, the customer does not acquire control of the asset as its created.

•          Criterion (c) – no alternate use to entity and right to seek payment:

❖     The asset is being specifically created for the customer. The asset is customized to customer’s requirements, such that any diversion for a different customer will require significant work. Therefore, the asset has practical limitation in being put to alternate use.

❖     Further, Space Limited has a right to enforce payment if contract was early terminated, for reasons other than Space Limited’s failure to perform.

Therefore, criterion (c) is met and such performance obligation is said to be met over a period of time