Under GAAP, a company may freely choose whether to use the percentage of completion method, or the completed contract method, of accounting for long-term contracts. Neither method is preferred by the FASB.

Question

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The FASB under GAAP generally prefers the percentage of completion method for long-term contracts when the outcome can be estimated reliably. The completed contract method is allowed when the outcome cannot be reliably estimated.

Under GAAP, a Company May Freely Choose Whether to Use