Question

Which of the following is not true about contract liabilities?

a. Contract liabilities might be called deferred revenue.
b. Contract liabilities are recognized when the seller has been paid in advance of satisfying its performance obligations.
c. Contract liabilities are only recognized when the seller has a conditional right to receive payment.
d. Contract liabilities may be shown on a separate line of the balance sheet.

Answer 1

Contract liabilities are recognized when the seller has been paid in advance of satisfying its performance obligations. They are not only recognized when the seller has a conditional right to receive payment.

Step-by-step explanation:

Contract liabilities are recognized when the seller has been paid in advance of satisfying its performance obligations. This means that option b is true, not false. Therefore, the answer to the question is c. Contract liabilities are only recognized when the seller has a conditional right to receive payment.

Option c is incorrect because contract liabilities are recognized when there is an unconditional right to consideration, meaning that payment is not conditional on any further performance obligations. Contract liabilities might commonly be called deferred revenue, as stated in option a, and can be shown on a separate line of the balance sheet, which is mentioned in option d.