In considering whether to recognise revenue when there are associated options:
A) The probability of the exercise of the options must be considered.
B) The probability of the exercise of the options must not be considered.
C) Put options will always give rise to revenue, whereas call options will not.
D) Call options will always give rise to revenue, whereas put options will not.
E) None of the given answers.

Question

Quizplus · Accepted Answer

The probability of exercise must be considered when recognizing revenue associated with options. This is because if there is uncertainty regarding the exercise of the options, the revenue recognized may need to be adjusted later. By considering the probability of exercise, an entity can make a more accurate estimate of the revenue that should be recognized.

In Considering Whether to Recognise Revenue When There Are Associated