Revenue Recognition in construction contracts

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 April 2010 I am from Ahmedabad. I just wanted to know the method of revenue recognition for construction contracts that is normally followed. I doubt that method prescribed by AS 7 of recognition on the basis of percentage completion is followed by everyone. Please guide me

M Prabhakar Menon

M Prabhakar Menon (Expert)
Follow

01 April 2010 The selection of either method has its +s and -s U can change the method at any future date but the cause and effect will have to be suitably disclosed in the audited annual report.Income Tax authorities have their own thumb rule and which ever method u may follow doesnt matter to them. Under either method chosen the record keeping should be pucca.By and large the percentage of completion is being followed by the industry as it matches revenue expenses/recipts every year and is closer to that followed by the tax authorities.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
Follow

01 April 2010 As per Accounting standard 7 you need to follow only Percentage of completion methood only for revenue recognation.in this you need to calculate Total cost till date plus cost to be complete with this you need to find out percentage of cost till date on total cost and apply the computed percentage on the contract value and get the sale value.still you need to clarification feel free to contact r.krishnanblr@gmail.com

Upgrade to CAclubindia Pro. Subscribe Now!