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.
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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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
The better tax treatment of the transaction, however, was to use the percentage of completion method of accounting.
Q, however, discovers that the $50,000 income estimate under the percentage of completion method should have been only $7,000.
Until 2008, Emaar had adopted the percentage of completion method of revenue recognition for its developments as it results in better reflection of operational results and level of development carried out by a real estate company on a periodical basis.
The percentage of completion method should be applied when recognizing revenue from services and construction contracts, as proposed in the ED.
Revenue under long-term contracts is usually recognized using the percentage of completion method. This method requires the use of significant judgment and estimates regarding contract value and estimated costs at completion.
Certain construction trades must use the percentage of completion method.
The IRS is in the process of updating the regulations under section 460, including the definition of what is a "unique item."(92) If the IRS successfully incorporates its recent examination position utilizing a broad definition of what is a unique item, many manufacturers may find that they are required to utilize the percentage of completion method.(93) The elimination of the procedure to adopt the percentage of completion method under Notice 89-15 will be of significant benefit to taxpayers that should have been on the percentage of completion method in the past.
FAS 66: Sales of Real Estate Accrual method 10% Percentage of completion method 10% Installment method 10% Accrual method 90% Percentage of completion method 90% Accrual method 20% Significant receivable 15%
Under the percentage of completion method, the full amount of the change applicable to the current and previous periods (i.e., $1,000,000 x 75 percent = $750,000) would be recognized in the year that the change in estimate is made.
It requires the use of the percentage of completion method for the recognition of revenue and profits on construction contracts.
Under current law, businesses that produce property under a long-term contract must use either the percentage of completion method or percentage of completion-capitalized cost method.

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