Final answer:
Contract assets and liabilities are recognized and presented in financial statements when certain conditions are met. Contract assets are recognized when a company has the right to receive payment for goods or services that it has transferred to a customer, but the payment has not yet been received. Contract liabilities are recognized when a company has received payment from a customer but has not yet transferred the goods or services.
Step-by-step explanation:
Contract assets and liabilities are recognized and presented in financial statements when certain conditions are met.
Contract assets are recognized when a company has the right to receive payment for goods or services that it has transferred to a customer, but the payment has not yet been received.
Contract liabilities are recognized when a company has received payment from a customer but has not yet transferred the goods or services.
For example, if a company sells a product to a customer on credit, it would recognize a contract asset until the payment is received, and then recognize a contract liability until the product is delivered.