Which of the following is not true about revenue recognition with respect to long-term construction contracts?
A) Long-term construction contracts often are viewed as having a single performance obligation, because goods or services fail the "separately identifiable" criterion.
B) Long-term construction contracts often satisfy the criteria for recognizing revenue over time.
C) Long-term construction contracts require accounting for construction in progress as well as billings to customers.
D) Long-term construction contracts typically include multiple performance obligations because of all the different types of goods or services included for each project.

Question

Quizplus · Accepted Answer

Long-term contracts include goods or services that are highly interrelated, so they are not viewed as separately identifiable and are combined into a single performance obligation. Long-term contracts often qualify for revenue recognition over time, either because the customer owns the seller's work in process, such that the seller is creating an asset that the customer controls as it is completed, or because the seller is creating an asset that is customized for the customer, so the seller has no other use for the asset and has the right to be paid for progress even if the customer cancels the contract.

Which of the Following Is Not True About Revenue Recognition