completed-contract method

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Completed-Contract Method

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

completed-contract method

A method of recognizing revenues and costs from a long-term project in which profit is recorded only when the project has been completed. Even if payments are received while the project is in progress, no revenues are recorded until its completion. The completed-contract method is a conservative way of accounting for long-term undertakings and is used for certain types of construction projects. Compare percentage-of-completion method.
References in periodicals archive ?
DMCI restated the financials of its property-development arm as it shifted in accounting policy from completed contract method to percentage of completion method, which was done to align with current accounting practice in the real-estate industry.
The property developer's financial results in the prior year were restated to reflect the shift in accounting policy from completed contract method to percentage of completion method, aligning itself with the current accounting practice in the real estate industry.
Aspial has told SGX, that while it has made good progress in the sales and construction of its foreign projects, it cannot progressively recognise the revenue as the group applies the completed contract method of accounting for its foreign projects.
If no, then as a small contractor, you should use either: accrual, exempt percentage of completion method, completed contract method, or PCM for all your general construction contracts.
The Commissioner maintained that Shea Homes had improperly reported income using the completed contract method. (45) The essence of the Commissioner's argument was that the subject matter of the sales contracts was the individual homes themselves, rather than the larger community that included the amenities and common improvements.
Revenue for longterm contracts is recognized before delivery using either the percentage-of-completion or completed contract method. GAAP requires the percentage-of-completion method unless reliable estimates cannot be made.
We use the completed contract method if we cannot estimate the costs with a reasonable degree of reliability.
Deyaar said it has adopted a revenue recognition policy based on the recommendations of the International Accounting Standard Board relating to the International Financial Reporting Interpretations Committee (IFRIC) 15 u Agreements for the Construction of Real Estate, to recognise revenue based on the completed contract method.
The directives, each dated September 15, 2009, relate to the Tier I mixed service costs issue and two Tier II issues: contractual allowances in the health care industry and the super completed contract method of accounting.
The lower revenue and net operating profit over half-year 2008 figures of AED 8,126 million ($2,212 million) and AED 3,011 million ($820 million), respectively are attributed to the overall economic slowdown following the global economic crisis, and Emaar's new revenue recognition policy based on completed contract method.
As of January 1, 2009, Emaar has revised its revenue recognition policy based on the new recommendation of the International Accounting Standard Board (IASB) relating to the International Financial Reporting Interpretations Committee (IFRIC) 15 - Agreements for the Construction of Real Estate, to recognize revenue based on completed contract method.
One alternative is the completed contract method, under which revenue and expenses are not recorded until the contract is complete.

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