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Hello Sir,
could you please help me to clear the situation with revenue recognition?
For contract asset/liability I learnt this algorythm:
1) Calculate total profit on the contract.
2) Calculate % of recognition
3) Calculae profit based on % of recognition4) Contract asset/liability =
Actual costs incurred to date + profit to date (from step 3) – amount invoiced
But here in BPP they just calculate the recognized revenue less amount billed.
The first algorythm I’ve taken from Kaplan book.
Could you please explain me the right way of dealing with such questions?
Thank you in advance!
Hi,
I’ve seen and heard of the method used to answer this question but the way you’ve calculated it is perfectly feasible too. There isn’t too much guidance within the standard regarding the amount of the contract asset/liability and so a variety of different methods could be used.
Based upon this then I doubt that you would get a question like this in the exam as different methods will give a different answer.
Thanks
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