IAS 11 Construction Contracts

Yaz Davies
Mind Map by Yaz Davies, updated more than 1 year ago
Yaz Davies
Created by Yaz Davies almost 6 years ago
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Description

Revision of the IAS 11 Construction Contract accounting standard

Resource summary

IAS 11 Construction Contracts
1 Fixed Price
2 Cost Plus
3 Conflict between
3.1 Prudence

Annotations:

  • Prudence would require that no income or profits are anticipated until realised
3.2 Matching

Annotations:

  • Matching requires that costs are matched to the income they generate in the same period
3.3 Fair presentation

Annotations:

  • The income statement should be a fair presentation of an entity's position therefore matching wins
4 Contracts for more than one year

Annotations:

  • watch out for this, just because the word construction is used does not mean it constitutes a construction contract under IAS 11
5 Contract Revenue
5.1 Reasonable Certainty

Annotations:

  • where income cannot be estimated with reasonable certainty, the income statement must still reflect the activity for the period and as such revenue is matched against cost showing no profit or loss Payments on account DO NOT represent the revenue figure
5.2 Proportion of Work Done

Annotations:

  • Work is certified by professional surveyors.
5.3 Specific points
5.4 Profitable Contracts

Annotations:

  • Contract profit is usually recognised based on the percentage of work completed and the cost of sales becomes the balancing figure
5.4.1 Cost of Sale

Annotations:

  • Crucial Exam point, calculated as a balancing figure
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