Which of the following statements is incorrect with respect to revenue recognition of construction contracts?
A) The percentage-of-completion method is to be applied for fixed price contracts if the recognition criteria are satisfied.
B) IASB (2011) requires individual construction contracts to be accounted for separately and the requirements of the standard to be applied separately to each contract.
C) The percentage-of-completion method should be used, provided certain conditions are met that enable the outcome of the contract to be reliably measured.
D) Percentage-of-completion method requires contract revenue to be matched with progress billings, resulting in the reporting of revenue, expenses and profit which can be attributed to the amount billed to customers.

Question

Quizplus · Accepted Answer

The percentage-of-completion method does not require contract revenue to be matched with progress billings. Instead, it requires revenue to be recognized based on the progress of the contract relative to its completion. Progress billings are only used to determine the amount of billings in excess of costs or costs in excess of billings, which are reported as assets or liabilities, respectively.

Which of the Following Statements Is Incorrect with Respect to Revenue