A construction company is in the middle of a two year construction contract when it receives a letter from the customer extending the contract by a year and requiring the construction company to increase its output in proportion of the number of years of the new contract to the previous contract period.
This is allowed in recognizing additional revenue according to IAS 11 if
(a) Negotiations have reached an advanced stage and it is probable that the customer will accept the claim.
(b) The contract is sufficiently advanced and it is probable that the specified performance standards will be exceeded or met.
(c) It is probable that the customer will approve the variation and the amount of revenue arising from the variation, and the amount of revenue can be reliably measured.
(d) It is probable that the customer will approve the variation and the amount of revenue arising from the variation, whether the amount of revenue can be reliably measured or not.