LTCC Flashcards
Formula
- Construction Revenue
Fixed Price + Escalation Clause less Penalties +/- Variations
Variations = only if probable and measurable
Formula
- Construction Costs
Directly Attributable + Indirectly Attributable + Reimbursable Costs
Not reimbursable = OPEX
When to use Percentage of Completion?
if outcome can be reasonably estimated
Criteria to Use POC (CCN)
- Customer Consume benefits as the entity perform
- Customer Control the asset as it is created
- Entity create asset with No alternative use
at least one is met (no need for all)
In Cost-Recovery Method, there is no revenue. True or False?
In Cost-Recovery Method, there is no profit. True or False?
False (revenue is recognized up to costs CR = CC)
True
Criteria for Control (PAROL)
Physical possession of asset
Accept the asset
Risk and rewards are assumed
Obligation to pay the seller
Legal title to the asset
Contract Price less Total Estimated Cost
= Estimated Gross Profit
How to get Total Estimated Cost?
CITD (past + present)
‘+ Estimated Cost (future)
Contract Price less Total Estimated Cost
= Estimated Gross Profit
What to do if estimated gross profit is negative?
recognize 100% loss (prudence)
How to get percentage of completion?
CITD / TEC
POC vs Cost-Recovery
- recognition of profit
POC - use %
Cost-Recovery - 0 (unless completion year)
POC vs Cost-Recovery
- recognition of loss
POC - 100 %
Cost-Recovery - 100 %
T-Account of CIP
Dr. Cost, Profit
Cr. Loss
T-Account of PB
Cr. All Billings
T-Account of AR
Dr. Billings
Cr. Collections
CIP and PB
- will result to Contract Asset or Contract Liability
- what is the presentation in BS?
net
Contract Retention or Mobilization Fee
- affect collection
Contract Retention
- Mobilization Fee → affect AR
- Contract Retention → check muna ni customer if ayos ba, tsaka niya ibibigay ang pera = “retained”
- Mobilization Fee → manghihingi ka muna kay customer, para may panggastos ka = “earnest money”
Contract Retention or Mobilization Fee
- withheld as security
Contract Retention
- Mobilization Fee → deducted from bills (to mobilize)
- Contract Retention → check muna ni customer if ayos ba, tsaka niya ibibigay ang pera = “retained”
- Mobilization Fee → manghihingi ka muna kay customer, para may panggastos ka = “earnest money”
Contract Retention or Mobilization Fee
- current liability
Mobilization Fee (advances from customer)
- Contract Retention → current asset (withheld until the end)
- Contract Retention → check muna ni customer if ayos ba, tsaka niya ibibigay ang pera = “retained”
- Mobilization Fee → manghihingi ka muna kay customer, para may panggastos ka = “earnest money”
