A few accounting interns were discussing the timing of revenue recognition for long-term construction contracts. The discussion focused on which method was most like the typical revenue recognition method recognizing revenue at the point of product delivery. One side argued that recognizing revenue upon project completion was preferable because it was analogous to recognizing revenue at the point of delivery. This side was represented by let’s say Karl. The other side disagreed and supported recognizing revenue over time, stating that it was analogous to accruing revenue as a performance obligation was satisfied. The second side also pointed out that an advantage of recognizing revenue over time is that it provides information sooner to users. This side was represent by let’s say Doug. Please address your correspondence to the accounting office staff. What is the guidance for recognizing revenues in long-term construction contracts? B. Please provide examples of each approach
. A few accounting interns were discussing the timing of revenue recognition for long-term construction contracts. The discussion focused on which method was most like the typical revenue recognition method recognizing revenue at the point of product delivery. One side argued that recognizing revenue upon project completion was preferable because it was analogous to recognizing revenue at the point of delivery. This side was represented by let’s say Karl. The other side disagreed and supported recognizing revenue over time, stating that it was analogous to accruing revenue as a performance obligation was satisfied. The second side also pointed out that an advantage of recognizing revenue over time is that it provides information sooner to users. This side was represent by let’s say Doug. Please address your correspondence to the accounting office staff.
- What is the guidance for recognizing revenues in long-term construction contracts?
B. Please provide examples of each approach
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