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F1M4P2 Long-Term Construction Contracts, Percentage of Completion Method…
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Completion Method
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B/S presnetation
Current Assets (Same as %, but without estimated earnings)
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U.S. GAAP only, IFRS do not allow
If can't estimate under IFRS, use cost recovery method
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B/S Presentation
They are the same B/S accounts as percentage method, except that there are no more "earnings" in the CIP and Progress Billings account, only "cost"
Requirement
Unlike GAAP, IFRS does not allow the Completed contract method.
Cost recovery method is used if estimates for percentage method are not available. Under this method, revenue is the excess cash after the incurred cost.
Calculation
Gross profit is recorded only when contract is complete. However during interim periods the CIP and Progress Billings are still netted, just without "earnings".
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Construction Complete
- Close billings into revenue
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- Close construction accounts
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