Answered

At Westonci.ca, we connect you with the answers you need, thanks to our active and informed community. Discover in-depth solutions to your questions from a wide range of experts on our user-friendly Q&A platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

Mars, Inc. follows IFRS for its external financial reporting, while Jerome Company uses GAAP for its external financial reporting. During the year ended December 31, 2021, both companies changed from using the completed-contract method of revenue recognition for long-term construction contracts to the percentage-of-completion method. Both companies experienced an indirect effect, related to increased profit-sharing payments in 2021, of $30,000. As a result of this change, how much expense related to the profit-sharing payment must be recognized by each company on the income statement for the year ended December 31, 2021

Sagot :

anthougo

Answer:

Mars, Inc (IFRS) and Jerome Company (GAAP) for External Reporting

Change from completed-contract method of revenue recognition for long-term construction contracts to the percentage-of-completion method.

                                               Mars, Inc    Jerome Company

Expenses to be recognized        $0                $30,000

Explanation:

GAAP and IFRS previously recognized two methods for accounting for long-term construction contracts: the completed contract method and the percentage of completion method.  GAAP allowed for an adjustment to be made to the income as a result of a change in method for unrecognized expenses in the previous period, whereas IFRS did not allow such an adjustment.  However, the harmonized revenue standards under GAAP ASC 606 and IFRS 15 now stress the performance obligations that have been met under any contract as the standard criteria to measure revenue recognition.

Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. We hope you found this helpful. Feel free to come back anytime for more accurate answers and updated information. Get the answers you need at Westonci.ca. Stay informed by returning for our latest expert advice.