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Sahara Desert Homes (SDH)reports under IFRS and constructed a new subdivision during 2015 and 2016 under contract with Cactus Development Co.Relevant data are summarized below:
SDH uses the cost recovery method under IFRS to recognize revenue.
-In its December 31,2015,balance sheet,SDH would report:

Question

Use the following to answer questions 
Sahara Desert Homes (SDH)reports under IFRS and constructed a new subdivision during 2015 and 2016 under contract with Cactus Development Co.Relevant data are summarized below:
  SDH uses the cost recovery method under IFRS to recognize revenue.
-In its December 31,2015,balance sheet,SDH would report:

Quizplus · Accepted Answer

SDH uses the cost recovery method, which means revenue is only recognized once the costs of the project have been recovered. Therefore, in the first year of the project (2015), the costs would have exceeded the billing to Cactus Development Co. This creates a liability known as billings in excess of cost, which would be reported on the December 31, 2015, balance sheet.

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