completed-contract method

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.
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The advantage of the completed-contract method is that it normally achieves the maximum deferral of taxes.
Keeping your balance: Construction accounting tax tips
The Service says courts erred in decisions on the placed-in-service date of a retail store, the use of the completed-contract method, and an S corporation's payment of an employee's personal expenses.
IRS signals nonacquiescence in 3 cases
31, 2013, the following would have yielded AMT tax adjustments had G not met the exemption for 2013: Excess MACRS depreciation over AMT depreciation--$4,000; adjustment for income on long-term contracts recognized on completed-contract method rather than percentage-of-completion method--$15,000.
Qualifying as a small business corporation for AMT purposes
Although the completed-contract method allows you to defer taxes on your income, it prevents you from deducting losses on unprofitable jobs until the contract ends.
Choosing among construction accounting methods
The completed-contract method is used when reasonable estimates cannot be made as to costs, profits, or time of completion; when the contract is not clear; collection is doubtful; or when the company may not be able to satisfy the contract.
Twenty questions on International Financial Reporting Standards
There are two methods to recognize revenue on long-term construction-type contracts: the percentage-of-completion method and the completed-contract method.
Revenue recognition for long-term contracts: Companies that ignore the accounting rules could find themselves restating their earnings--and facing lawsuits and plummeting stock prices
17) Since enactment in the Tax Reform Act of 1986, section 460 has been repeatedly amended to reduce and ultimately eliminate the deferral benefit of the completed-contract method of accounting for long-term contracts.
Comments on proposed interest capitalization regulations: December 12, 1991
If a taxpayer meets the requirements of the exception, it may use the completed-contract method of accounting for income recognition (Sec.
Tax accounting methods for small businesses
Does the supplier do enough business to qualify for the completed-contract method of accounting for tax purposes?
Nail a construction niche: take a closer look at the structure of the building business
Defer all revenue until completion of installation as per the completed-contract method.
Computer software: the revenue recognition issues

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