How Are the Proceeds of the Sale of Product from the Pre-Production

question 30

Multiple Choice

How are the proceeds of the sale of product from the pre-production stage to be treated under AASB 6?

• A) Material revenues earned from the sale of product at the pre-production stage should be transferred to a reserve and recognised when the production revenues come on line. Immaterial revenues from sales at the pre-production stage are to be netted against costs incurred in the period for the area of interest.
• B) Revenue earned from pre-production sales is to be treated as a reserve and recognised once production revenues come on stream so that the accumulated costs for an area can be amortised against the total revenues earned from the area.
• C) Immaterial proceeds should be offset against the relevant pre-production costs, while material proceeds should be treated as production revenue and the costs of producing the product sold deducted from the revenue as cost of sales.
• D) Any revenue earned at any stage of production should be recognised as revenue in the period earned. When the revenue is earned at the pre-production stage and costs are being capitalised, those costs may continue to be capitalised until revenues from production are generated. The accumulated costs are then to be amortised against the post-production revenues.

Distinguish between shareholders, stakeholders, and officers within a corporation and their respective roles and rights.

Analyze the legal considerations surrounding corporate opportunities, including the safe harbor under the corporate opportunity doctrine.

Understand the structure and functions of corporate governance, including the role of the board of directors and voting processes.

Recognize the legal frameworks supporting shareholder rights and actions, including derivative suits and preemptive rights.

---

Definitions:

Noncurrent Liabilities

Financial obligations of a company that are not due to be settled within one year, including long-term loans, bonds payable, and long-term lease obligations.

Current

In finance, "current" typically refers to assets and liabilities that are expected to be realized or settled within one year from the reporting date.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time.

Net Income

The amount of earnings remaining after all expenses and taxes have been subtracted from total revenue.