Which of the Following Statements Is Not in Accordance with AAS

question 6

Multiple Choice

Which of the following statements is not in accordance with AAS 118 "Revenue" with respect to revenue recognition?

• A) When the selling price of a product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as revenue over the period during which the service is performed.
• B) When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest.
• C) When an entity sells goods and at the same time enter into a separate agreement to repurchase the goods at a later date, the two transactions are dealt with separately.
• D) When goods or services are exchanged or swapped for goods or services, the revenue is measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred.
• E) E: When goods or services are exchanged or swapped for goods or services and the fair value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents transferred.

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Definitions:

Operating Activities

The day-to-day activities of a business related to producing and selling its product, providing services, or other activities that are not investing or financing.

Common Size Income Statement

An income statement in which each line item is expressed as a percentage of sales revenue, facilitating comparison across companies or periods.

Percent of Assets

A measure or indicator expressed as a percentage of a company's total assets.

Interest Coverage Ratio

A financial metric used to determine how easily a company can pay interest on outstanding debt with its current earnings before interest and taxes.