CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

The percentage-of-completion method violates what general guideline on revenue recognition?

A. The earnings process is completed.
B. Collections are reasonably assured/have been received.
C. Costs are known or can be reasonably estimated.
Correct Answer: A

The percentage-of-completion method violates this guideline since revenues are recognized prior to the completion of the long-term project. The rationale is that it provides a better measure of periodic performance than the completed contract method.

User Contributed Comments 2

User Comment
kalps % of completion method violates guidlines on revenue recognition with regards to the earnings process being complete as it states that revenues should only be recognised on completion (completed contract method)
o123 **the basic tennet is that earings need to be complete in order to recognize revenue...but in the case of LT project you make this exception
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