Gemini prepares its financial statements using International Financial Reporting Standards (IFRS). If Gemini cannot reliably estimate the income and expenses of customer contracts, what accounting method should be used to recognize revenues?
A. Installment method.
B. Percentage-of-completion method.
C. Cost recovery method.
D. Completed contract method.
Answer:C
C is corrent because if the outcome of rendering services cannot be measured reliably, IFRS requires use of the cost recovery method.
A is incorrect because the installment method is a revenue recognition method used under US GAAP, not IFRS.
B is incorrect because percentage-of-completion is used when income and expenses can be reliably measured.
D is incorrect because IFRS does not permit the completed contract method.
