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Why would a firm do instead of valuing projects

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Reference no: EM132669881

"Unbilled" Receivables

Problem 1: An architectural firm has "time and materials" contracts that obligate its clients to pay for all time applied to the client's project. The balance sheet of the architectural firm shows a significant asset labeled Unbilled Receivables. The firm says this represents in-process projects, valued at the rates at which the customers will be charged for the architects' time. Why would a firm do this instead of valuing projects in process at their cost, the same as a manufacturing firm would value its in-process inventory? Does it make any difference in the reported owners' equity for the architectural firm to report such in-process work as receivables rather than as inventory? Why?

Reference no: EM132669881

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