Under ASPE, when selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be
A) the terms of payment in the contract.
B) the degree to which a reliable estimate of the costs to complete and extent of progress toward completion can be made.
C) the method commonly used by the contractor to account for other long-term construction contracts.
D) the inherent nature of the contractor's technical facilities used in construction.

Question

Quizplus · Accepted Answer

The degree to which a reliable estimate of the costs to complete and extent of progress toward completion can be made is the principal factor to be considered when selecting an accounting method for a newly contracted long-term construction project under ASPE. This is because ASPE requires that revenue be recognized based on the extent of progress toward completion, and reliable estimates of costs and progress are necessary to apply this method of revenue recognition. The terms of payment, method commonly used by the contractor, and the nature of the contractor's technical facilities used in construction may be considered, but they are not the principal factor for selecting an accounting method for long-term construction contracts under ASPE.

Under ASPE, When Selecting an Accounting Method for a Newly