Which of the following statements regarding the recognition of expenses related to long-term contracts under IFRS is true? A: General and administrative expenses are normally recognized as an asset. B: The cost of wasted resources of an abnormally high amount are recognized as an asset until the performance obligation has been met. C: If capitalized costs are no longer expected to be recovered through the contract, a portion of contract revenue should be reversed. D: Costs that will be reimbursed by the customer are recognized as an asset.

Which of the following statements regarding the recognition of expenses related to long-term contracts under IFRS is true? A: General and administrative expenses are normally recognized as an asset. B: The cost of wasted resources of an abnormally high amount are recognized as an asset until the performance obligation has been met. C: If capitalized costs are no longer expected to be recovered through the contract, a portion of contract revenue should be reversed. D: Costs that will be reimbursed by the customer are recognized as an asset.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Which of the following statements regarding the recognition of expenses related to long-term contracts under
IFRS is true?
A: General and administrative expenses are normally recognized as an asset.
B: The cost of wasted resources of an abnormally high amount are recognized as an asset until the
performance obligation has been met.
C: If capitalized costs are no longer expected to be recovered through the contract, a portion of contract
revenue should be reversed.
D: Costs that will be reimbursed by the customer are recognized as an asset.

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