Dear Collegue,

How do we recognise the revenue in Building Construction company.

Illustrate with good/understandable example.

Can anybody focus on it ?

Thanks in advance

Hi
Revenue to be recognized on the basis of percentage of completion POC basis. If you got contract to built builiding for a some one than POC method may suits you.
Actual cost divided by Estimated cost and then multiply by estimated revenue to recognized the portion of revenue recognised or if engineer can identify the percentage of construction completed you can use than percentage to record revenue.

SHABI

Hi,

Construction contracts are covered with IAS11.

For prudence remember to recognise the loss at once as expense, when you start to expect

such loss after completion the construction.

Regards,

Jakub

Dear Zakariyya,

I suggest you IAS 11 with two alternatives treatments:

– to recgnize revenue only after completion

– to recognize revenue based on percent of advancement (completitude ratio).

If first treatment is obvious, for the second one I give one example:

eg:

a construction in amount of 100,000 in cost with the total selling price 120,000

Let’s assume that in the end of an accounting period (month, year) the completion of the pr
oject is about 40% (that’s mean physical stage). The cost of the project may be 30,000, 40,000 or 50,000 depending of the project completion. That means to not mix physical completion with cost completion.

So, let’s assume that for 40% physical completion ratio we register 45,000

We capitalize 45,000 and we accrued (45,000 / 100,000) x 120,000 = 54,000

In this respect we will match better the cost with revenues for the first period and also for next period.

I recommend this second method – otherwise the company seems to work for nothing in the first period; to not create any value added, that means a nonsens.

Best regards,

Marian

Dear Hasan

Thanks for communication

Yes we have apply POC method

Any Quote fm IFRS / IAS

Regards

Yes immediate loss should be booked on onerous contracts (loss contracts) that is When estimated cost is more than estimated revenue.

Shabi