When Using the Cost Recovery Method of Accounting for Long-Term

question 55

Multiple Choice

When using the cost recovery method of accounting for long-term construction contracts under IFRS, early in the life of the contract it is typically the case that:

• A) Expenses in excess of revenues are recognized.
• B) Revenues in excess of expenses are recognized.
• C) An equal amount of revenue and expense is recognized.
• D) There is no predictable pattern of revenue and expense.

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Definitions:

Proving

The process of establishing the truth or validity of something through evidence or argument.

Vesting

The process by which an individual earns the right to receive full benefits from a pension plan or stock option over time.

Purpose

The reason for which something is done or created or for which something exists.

Creditor Beneficiary

A third party that benefits from a contract between two other parties, particularly when one party promises to pay a debt owed to the creditor beneficiary by the other party.