Which of the following suggested bases of recognizing revenue is not permitted by authoritative literature?
A)During production for long-term construction contracts if reliable estimates of the extent of progress and of the cost to complete can be made and if reasonable assurance of collectibility exists.
B)At the completion of production if immediate marketability at a quoted price exists for a product whose units are interchangeable.
C)On an accretion basis where product marketability at known prices exists and it is desirable to recognize changes in assets, such as growing timber.
D)On a cash basis if no reasonable basis exist for estimating collectibility.

Question

Quizplus · Accepted Answer

Option C is not permitted because authoritative literature generally requires revenue to be recognized when it is earned and realizable, and the accretion basis for recognizing revenue does not fit these criteria. It suggests recognizing revenue based on changes in asset value (e.g., growing timber), which does not align with the principle of revenue recognition upon transfer of goods or services to customers.

Which of the Following Suggested Bases of Recognizing Revenue Is