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AS 7, 9 and 3
DTRTI Lucknow
AS 7
REVENUE RECOGNITION IN
CONSTRUCTION CONTRACTS
AS 7 for Construction Contracts
• Policy disclosure-
• The method of determination of stage of completion
• Method used to determine the revenue
• In addition required to disclose-
– Amt of contract revenue recognized in the period
– Contract cost incurred
– Advance recd
– Gross amount due from customers…(cost incurred +recognized
profit)-(sum of recognized losses+ progress billing)
– Gross amount due to customer for contract work---(sum of
recognized losses +progress billing)—(cost incurred+ recognized
profit0
b) Variation 20 20
c) Total contract value 900 920 920
Year 1
Rev (900 x20/100) 180 180
expenses 161 161
Profit 19 19
Year 2
Rev 920 X 70/100 644 180 464
Exp 820 X 70/100 574 161 413
PROFIT 70 19 51
Year 3
Rev 920 644 276
Exp 820 574 246
Profit 100 70 30
REVENUE RECOGNITION
• WHEN REVENUE IS TO BE RECOGNIZED
• WHEN REVENUE RECOGNITION CAN BE
POSTPONED