18 December 2009
A construction contract may be negotiated for the construction of a single asset such as a bridge, building, dam, pipeline, road, ship or tunnel. A construction contract may also deal with the construction of a number of assetswhich are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use; examples of such contracts include those for the construction of refineries and other complex pieces of plant or equipment For the purposes of this Statement, construction contracts include: (a) contracts for the rendering of services which are directly related Construction Contracts 111 to the construction of the asset, for example, those for the services of project managers and architects; and (b) contracts for destruction or restoration of assets, and the restoration of the environment following the demolition of assets. 5. Construction contracts are formulated in a number of ways which, for the purposes of this Statement, are classified as fixed price contracts and cost plus contracts. Some construction contractsmay contain characteristics of both a fixed price contract and a cost plus contract, for example, in the case of a cost plus contract with an agreed maximum price. In such circumstances, a contractor needs to consider all the conditions in paragraphs 22 and 23 in order to determine when to recognise contract revenue and expenses.
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