One Approach to Revenue Recognition Proposed for Self-Generating and Regenerating

question 45

Multiple Choice

One approach to revenue recognition proposed for self-generating and regenerating assets is to recognise volume changes as revenue or expense but to treat price changes as an adjustment to equity through a reserve.Arguments against this approach include:

• A) It is often impracticable to separate price and volume changes.
• B) There is no precedent in accounting standards for the recognition of changes in market values as adjustments to equity.
• C) The total increase in value is the production for the period and it should be available for distribution to owners.
• D) The revenue for the period would not reflect the performance of management.
• E) All of the given answers.

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Definitions:

Logarithmic Equation

An equation that involves the logarithm of an expression equal to a value or another logarithm.

Compounded Monthly

Interest is compounded monthly when it is calculated and added to the principal sum of an investment or loan each month.

Annual Interest Rate

The annual interest rate is the percentage increase in money that one earns or pays on an investment or loan over the span of one year.

Compounded Monthly

Refers to the process where interest is added to the principal balance of an investment or loan, and future interest calculations are made on the new total, on a monthly basis.