As for construction contracts ( as 7)

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hari krishnan (Querist)
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03 July 2013 I am not clear regarding the revenue recognition with respect to construction contracts, especially the case where expected costs exceeds expected revenue!
I have come to known that such a situation demands the expected loss to be treated as an expense.
But I have come across a situation where, % of completion is applied on such expected loss, and is stated that such portion is to be recognized in the P&L.. and the balance shall be provided for as provision-- Isn't this according to CONSTRUCTION CONTRACTS??
I have searched for illustrations on similar cases, but I couldn't figure out any!

Kindly clarify my concept,
Regards,
Hari krishnan.

Rashid Mehmood

Rashid Mehmood (Expert)
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04 July 2013 See the International Accounting Standard 11

Whatever the method to recognize the revenue is used, in case of expected loss you have to account for all in the P&L account in the year when the expected loss is measured reliably.