Summary Business Accounting

Question:

The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally

accepted accounting principles.

Required:

1. Obtain the relevant authoritative literature on the percentage-of-completion method using the FASB’s

Codification

Research System at the FASB website ( www.fasb.org ). What is the specific citation that describes the

circumstances and conditions under which it is preferable to use the percentage-of-completion method?

2. List the circumstances and conditions.



Answer:



Requirement 1



The specific citation that specifies the the circumstances and conditions under which it is appropriate to

use the percentage-of-completion method is: FASB ASC 605–35–25–57: “Revenue Recognition–

Construction–Type and Production–Type Contracts–Recognition–Circumstances Appropriate for Using

the Percentage-of-Completion Method.”

Requirement 2

FASB ASC 605–35–25–57 reads as follows:

“The percentage-of-completion method is considered preferable as an accounting policy in circumstances

in which reasonably dependable estimates can be made and in which all the following conditions exist:

a. Contracts executed by the parties normally include provisions that clearly specify the enforceable

rights regarding goods or services to be provided and received by the parties, the consideration to

be exchanged, and the manner and terms of settlement.

b. The buyer can be expected to satisfy all obligations under the contract.