FAR 2: Section 2 L-T Construction Contracts

Question 1

Identify two method of revenue recognition for long-term construction-type contracts under US GAAP and IFRS.

Answer 1

US GAAP:

1. Percentage-of-completion
2. Completed-Contracted

IFRS:

1. Percentage-of-completion
2. Cost Recovery

Question 2

For L-T construction-type contracts, when are losses recognized?

Answer 2

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

Question 3

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

Answer 3

Total cost to date total estimate cost of contract

x

Total est. gross profit

Gross profit recognized to date