As for construction contracts ( as 7)

This query is : Resolved

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??

In short, can a trade-off be emerged between CONSTRUCTION CONTRACTS and AS-7??
Or do they both take different stands??

I have searched for illustrations on similar cases, but I couldn't figure out any!

Kindly clarify my concept,
Regards,
Hari krishnan.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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07 July 2013 According to my view and interpretation in AS-7. While doing the project cost,if you find the loss making at the project completion, then need to provide the expected loss in the books irrespective of the percentage of completion, percentage of completion only related to revenue recognition