When the cost recovery method is used to account for a long-term construction contract under IFRS, an equal amount of cost and revenue is typically recognized during the early life of the contract, such that high initial gross profit is recognized in net income.

Question

Quizplus · Accepted Answer

When the cost recovery method is used, no profit is recognized until the total costs incurred on the contract are recovered. Therefore, there is no high initial gross profit recognized in net income.

When the Cost Recovery Method Is Used to Account for a Long-Term