财务

问题如下：

Question A company entered into a 5-year construction contract with a total sales price of £3,000,000. The estimated total costs are £2,000,000 and the company incurred £500,000 actual costs in the first year. The company has extensive experience with similar types of contracts. Costs incurred provide an appropriate measure of progress toward completing the contract. Assuming it is highly probable that revenue will not be subsequently reversed, revenue recognized under the contract in Year 1 is most likely:

选项：

A.£500,000. B.£600,000. C.£750,000.

解释：

Solution

1. Incorrect because it assumes only the incurred actual costs as being recognized as revenue = £0.5m. The standard states that for performance obligations satisfied over time (e.g., where there is a long-term contract), revenue is recognized over time by measuring progress toward satisfying the obligation.

2. Incorrect because it assumes that revenue is only recognized according to the time elapsed. But, the standard refers to performance obligations satisfied over time and requires that progress toward complete satisfaction of the performance obligation be measured based on input method such as the one illustrated here (recognizing revenue based on the proportion of total costs that have been incurred in the period) or an output method (recognizing revenue based on units produced or milestones achieved). Accordingly, the calculation becomes £3.0m / 5 years = £0.6m.

3. Correct because the standard states that for performance obligations satisfied over time (e.g., where there is a long-term contract), revenue is recognized over time by measuring progress toward satisfying the obligation. The standard refers to performance obligations satisfied over time and requires that progress toward complete satisfaction of the performance obligation be measured based on input method such as the one illustrated here (recognizing revenue based on the proportion of total costs that have been incurred in the period) or an output method (recognizing revenue based on units produced or milestones achieved). Accordingly, the company has incurred 25% of the total expected costs (£0.5m / £2.0m); and will thus recognize £0.75m (25% × £3.0m) in revenue in Year 1.

Analyzing Income Statements

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