F2 - Long-Term Construction Contracts

Question 1

Identify two methods of revenue recognition for long-term construction-type contracts under U.S. GAAP and IFRS.

Answer 1

U.S. GAAP

• Percentage-of-completion
• Completed-contract

IFRS

• Percentage-of-completion
• Cost recovery

Question 2

For long-term construction-type contracts, when are losses recognized?

Answer 2

Immediately when discovered, regardless of the end method used for revenue recognition.

Question 3

State the formula for recognizing the gain/loss on long-term construction-type contracts under the percentage-of-completion method.

Answer 3

_ Total cost to date _ X Total est. gross profit
Total esttimated cost of contract

• Gross profit recognized to date