Hello. When we run revenue recognition, we noticed that for some of our projects, cost is being recognized even when there are no actual costs. The expectation is that no cost would be recognized. If someone has an idea of why this is happening, I would appreciate it if you could advise.
Hello,
At first glance, recognized costs in your example are provision for foreseeable loss. If your project is loss-making (your estimated revenue is lower than estimated costs), and your revision accounting is set to “Catch-up”, Revenue Recognition algorithm is recognizing full loss in current period (adjusting recognized costs).
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