Which of the following is least likely to be a reason why a long-term construction contract would qualify for revenue recognition over time?
A) The customer consumes the benefit of the seller's work as it is performed.
B) The customer controls the asset as it is created.
C) The seller is creating an asset that has no alternative use to the seller, and the seller has the legal right to receive payment for progress to date.
D) The seller is constructing an addition to property that is owned by the customer.

Question

Quizplus · Accepted Answer

A construction contract is least likely to be viewed as a service that the customer consumes as it is provided. Long-term contracts often qualify for revenue recognition over time for the other two reasons: 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 (which would be the case if the seller is constructing an addition to property that is owned by the customer), 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 Least Likely to Be a Reason