Question

1)Conditional rights should be reported on the statement of financial position

as contract liabilities.

only once the conditions have been met.

as contract assets.

as receivables.

Answer 1

Solution:

Contract assets are of two types:

(a) Unconditional rights to receive consideration because the company has satisfied its performance obligation with the customer, and

(b) Conditional rights to receive consideration because the company has satisfied one performance obligation, but must satisfy another performance obligation in the contract before it can bill the customer.

Companies should report unconditional rights to receive consideration as a receivable on the balance sheet. Conditional rights on the balance sheet (e.g., unbilled receivables) should be reported separately as contract assets.

In view of the above, Conditional rights should be reported on the statement of financial position as "Contract Assets"

Hence 3rd option is correct.