Under IFRS

Primarily IAS 18 & IAS 11

Very similar to
language in FASB’s
conceptual framework
 Use “zero profit method”
 This method puts just enough revenue on the
income statement to cover the costs incurred.
 The result is basically same as completed contract
(no profit is reported) but would change to
percentage of completion at a later point in time
when estimates become possible
 The problem is discussed in IFRIC Interpretation 15
 This may result in “zero profit” or a loss if not all costs are
recoverable
 Fixed price contract
 Cost plus contract
 (i) to the extent that it is probable that they will result in
revenue; and
 (ii) they are capable of being reliably measured.
 The “gross” terminology seems misleading since the IAS 11
specifically says it is the cost plus profit less losses and
progress billings
 In other words, the computation same under IASB and
FASB but it has a different title
 Current asset:  Current asset:
“Gross amount due from “Costs of uncompleted
customers for contract work” contracts in excess of
related billings”

 Current liability:  Current liability:

“Gross amount due to “Billings of uncompleted
customers for contract work” contracts in excess of
related costs”
Joint Project of FASB & IASB on Revenue Recognition
Exposure Draft
comments due Oct. 22, 1010