0
What general rule of revenue recognition does percentage of completion violate?
Wiki User
∙ 15y ago
For a short answer, it doesn't violate any general rules. Under International Financial Reporting Standards (IAS 18) revenue from services must always be recognised in this way. Revenue from construction contracts is also recognised in this manner in certain circumstances.
The rules in the USA and other jurisdictions may be different.
General rules get taught differently by different teachers and no doubt vary geographically and over time. An introductory lesson may have a general rule that income has to be recognised only when the job is done, i.e. completed, but corporate reporting needs more sophisticated treatments. The method of recognizing revenue under the percentage complete method fulfills two of the basic principles of GAAP. Revenue Recognition: Which requires that revenue be booked as revenue when the revenue has been earned regardless of the timing of invoicing or cash receipts. Matching: Which requires that Revenues and their related Costs be recognized in the same accounting period. Regardless of timing of invoicing or of cash receipts. The percent complete methods helps to determine the relationship between revenues and costs that is required by the matching principle.
Wiki User
∙ 15y ago
Add your answer:
Earn +20 pts
What calculations are use to determine the target revenue figures?
The revenue figure can be achieved by taking the sales goal of it's percentage annual revenue growth and subtact that from the previous year's then dividing that to get the forcast amount. I believe this is the answer... I'm still searching for the right formula to use.
What are the two types of municipal bonds?
Municipal bonds are either general obligation or revenue bonds.
What is the difference between profit and yield?
Yield is return or revenue on investment, profit is Yield minus expenses or tax. It may not cover every form of investment, but in general it should show the diff.
What is the fastest-growing revenue raiser?
lotteries
What is fastest-growing revenue raiser?
One of the fastest growing revenue raisers is the media. More specifically, sponsorship and phone lines within media outlets.
When work to be done and costs to be incurred on a long-term contract can be estimated dependably what methods of revenue recognition is preferable?
percentage-of-completion method
Issues in Percentage-Of-Completion Method?
Revenue can be misstated by manipulating the Total Estimated Cost (or Estimate At Completion)
How revenue is treated under long-term contract?
Revenue is calculated as per percentage of completion method in long term contracts like construction contracts as first of all total cost and revenue is determined and after that it is allocated to specific fiscal year according to the percentage of completion of contract or project
How is revenue in percentage of completion method computed?
Revenue is calculated as a percent of the total contract revenue according to the percent of completion. The percent of completion as calculated as the incurred costs up to the end of the reporting period to the total estimated cost for the contract. Simply it is : Incurred costs up to date ــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــ X Total Contract Revenue Total Estimated cost
The revenue recognition principle dictates that revenue should be recognized in the accounting records?
The revenue recognition principle dictates that revenue should be recognized in the accounting records when it is earned.
Long-term contractors are permitted to use the percentage of completion method for the purpose of revenue recognition and income determination. Consider why this method is not used by other companies?
This method is used for long-term projects when there is a contract, and reliable estimates of production completed, revenues and costs are possible.
What is the treatment under percentage of completion method if the cost to date is greater than the estimated cost?
First you will have to reestimate the new total cost of the project. Divide the cost to date by the new, restimated total cost. Multiply the ratio just computed by the contract price to get the new revenue recognition (inception to date). Subtract the previous period inception to date revenue from the the revenue you just calculated. The remainder is the current period revenue recognition. If the number is negative ad material, there may be some accounting treatments (restatements of prior periods) and possibly some tax look back treatments.
The revenue recognition concept?
The revenue recognition concept is commonly used in accrual form of accounting. This indicates revenue should only be recorded when and entity is completed to a substantial level.
Why is revenue recognized at the time of sale?
It is the basic rule of revenue recognition that unless and untill goods are not transferred to the customers revenue cannot be recognized and internation accounting standard number 2 deals in revenue recognition.
The accounting principle that requires revenue to be reported when earned is the?
revenue recognition
Which principle Revenue is recorded only when the earnings process is complete?
Revenue recognition principle
What is revenue recognition?
Revenue recognition is an accounting principle that prescribes when companies need to recognize revenue. Under US GAAP as well as IFRS companies need to recognize revenue when they have delivered the goods/rendered the services and payment is reasonably certain.
