IFRS and GAAP Will Sometimes Differ in the Method of Revenue

question 18

Multiple Choice

IFRS and GAAP will sometimes differ in the method of revenue recognition applied to construction contracts.Three different methods are involved: percentage of completion, cost recovery, and completed contract.The fastest to slowest revenue recognition among the methods is

• A)percentage of completion; completed contract; cost recovery
• B)completed contract; percentage of completion; cost recovery
• C)percentage of completion; cost recovery; completed contract
• D)cost recovery; percentage of completion; completed contract

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Definitions:

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders.

Total Assets

The sum of all current and non-current assets owned by a company, indicating its overall value.

Sales/Total Assets

A financial ratio that measures how efficiently a company is using its assets to generate sales.

Pretax Profit

Earnings before tax, indicating the profitability of a business before accounting for tax obligations.