Asked by MadiCAT Panther on May 29, 2024

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Under IFRS,when the cost recovery method is applied to installment sales,the seller will recognize gross profit only after the cumulative amount of cash collected exceeds the cost of sales.

Cost Recovery Method

An accounting technique where revenue is recognized only after the costs of the sold goods or services are recovered, deferring profit recognition.

IFRS

A collection of accounting guidelines formulated by the International Accounting Standards Board (IASB) to assist in the creation of financial statements for public companies worldwide, known as International Financial Reporting Standards.

Installment Sales

A sales method that allows customers to pay for goods or services over a period of time in installments.

  • Recognize revenue and expenses correctly under the installment sales method.
  • Apprehend the distinctions and correlations in the approach to revenue recognition under U.S. GAAP and IFRS.
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Radhi PandyaMay 30, 2024
Final Answer :
True
Explanation :
This is correct. Under the cost recovery method, the seller only recognizes gross profit once the cumulative amount of cash collected exceeds the cost of sales. Until that point, the seller only recognizes cash received as a reduction of the cost of sales.