Which of the following is NOT true with regard to the expected value approach to measuring earnings?
A) It must be highly probable that there will not be a significant reversal of revenue previously recognized.
B) The company likely has experience with similar contracts.
C) It must be highly probable that there will be a significant reversal of revenue previously recognized.
D) The company is able to estimate the cumulative amount of net revenue.

Question

Quizplus · Accepted Answer

The expected value approach to measuring earnings requires that it be highly probable there will not be a significant reversal of revenue previously recognized. Therefore, option A is true. The company likely has experience with similar contracts, which makes option B true. The expected value approach also requires the company to be able to estimate the cumulative amount of net revenue, making option D true. Option C is the opposite of what is required, making it false.

Which of the Following Is NOT True with Regard to the Expected