Question - Two first year accounting associates are discussing the timing of revenue recognition for long-term construction contracts, and more specifically, discussing which method best reflects the point-of-sale/delivery. One associate, Taylor, believes recognizing revenue at the time of completion is the preferred method and most like point-of-sale/delivery revenue recognition.
The other associate, Alex, believes recognizing the revenue over time is the preferred method because revenue is recognized as time progresses (as portions of the contract are completed), and the revenue can be reported sooner.
Do you agree with Taylor or with Alex? Explain why you agree with that associate.
Response Guidelines
Review your peers' responses. Reply to at least two learners and address the following:
- How does the timing of revenue recognition impact the users of the financial statements?
- How does a company decide which revenue recognition method to use if both are US GAAP-approved methods?