When the cost recovery method is used to account for a long-term contract under IFRS, an equal amount of cost and revenue is typically recognized during the early life of the contract, such that high initial gross profit is recognized in net income.

Question

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When the cost recovery method is used, no gross profit is recognized until total contract costs have been recovered. This method recognizes revenue and cost equally until total cost has been recovered, and only after that, revenue recognition exceeds the amount of cost recognition.

When the Cost Recovery Method Is Used to Account for a Long-Term