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Topic: Miscellaneous
Number of pages / Number of words: 3 / 776
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For example, if during the year, 25% of the building was completed, the builder can recognize 25% of the expected total profit on the contract. This method is preferred. However, expected loss should be recognized fully and immediately due to conservatism principle.

Completed contract method should be used only if percentage-of-completion is not applicable or the contract involves extremely high risks...


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Under this method, revenues, costs, and gross profit are recognized only after the project is fully completed. Thus, if a company is working only on one project, its income statement will show $0 revenues and $0 construction-related costs until the final year. However, expected loss should be recognized fully and immediately due to conservatism principle...


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