percentage-of-completion method

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Percentage-of-Completion Method

In construction and project finance, a method for calculating profits and losses in which revenue is recognized as it is received, provided that it is prorated according to the percentage of the project that is complete. This differs from the completed-contract method, which only recognizes revenues after the physical completion of the contract. Each method may have its own tax advantages.

percentage-of-completion method

A method of recognizing revenues and costs from a long-term project in relation to the percentage completed during the course of the project. Thus, the percentage-of-completion method allows a business profits (or losses) on a project before its completion. Compare completed-contract method.
References in periodicals archive ?
Q, however, discovers that the $50,000 income estimate under the percentage of completion method should have been only $7,000.
An advantage of the percentage of completion method is that it provides a better measure of annual costs for periods following the year of a change in estimate.
460(a) requires taxpayers to use the percentage of completion method (PCM) to account for taxable income from any long-term contract.
While the percentage of completion method is generally the standard for financial reporting purposes in file construction industry, there are a number of different methods available for income tax purposes depending upon a company's size and the type of work performed.
Under this new method (termed the "percentage of completion-capitalized cost" method), 40 percent of income from long-term contracts had to be reported on the percentage of completion method, with the remaining 60 percent on the taxpayer's normal method of accounting.
The previous percentage of completion method for these two segments will thus disappear entirely in the future.
Income from these new shipbuilding agreements will be identified over the respective agreement period in accordance with the Group's revenue recognition policy based on the percentage of completion method.
460 and so are not subject to the percentage of completion method for regular tax or AMT purposes or to the lookback rules for either regular tax or AMT purposes.
Both the revenues and costs from the real estate development activity are recognized by the percentage of completion method.
7 billion pertains to sales carried out in 2008 or earlier and reported as the projects progress, based on percentage of completion method.
that closed in the third quarter of fiscal 2006 and is being accounted for using the percentage of completion method.
If a taxpayer is using the percentage of completion method (PCM) of accounting, contract taxable income for a given year is computed by multiplying the contract price by the ratio of contract costs incurred during the year to estimated total contract costs.

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