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Accounting

The possible revenue recognition points are the signing of the contract, the beginning of construction, the progress stages of the construction (gradually over the life of the contract), the completion of the project to the satisfaction of the customer, and collection of the cash. To postpone taxes, you would want to delay recognition of revenue until the next year, even though you have completed more than half of the project. Of the four criteria, the strongest argument might be that the costs will not be fully known until the customer has indicated that the work is satisfactory. Collectibility of the payment may also be somewhat uncertain. The Income Tax Act allows completed contract accounting on contracts of less than 24 months so at a minimum, this revenue could be recognized when the contract is complete.

b. The gain on the portfolio could be recognized in the year in which it occurs or when the shares are sold. To postpone taxes, revenue should be recognized when the shar...

Posted by: Jennifer Valles

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