Construction Contract - EDITED Reporting-AST
July 22, 2022 | Author: Anonymous | Category: N/A
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Construcon
PFRS 15 Contracts
A c c o u n n g fo f o r S p e c i a l T r a n s a c c o n
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Learning Objectives:
Apply PFRS 15 to account for revenues from, and costs of, construction contracts. Account for onerous construction contracts.
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Account for changes in the transaction price of a construction
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contract Account for uncertainty in the collectability of contract revenue.
Applicabili Applicability ty of PFRS 15
An enty applies PFRS 15 Revenue from Conracs Conracs wih Cusomers Cusomers o o accoun for revenues from conracs wih cusomer. PFRS 15 shall be applied o Conracs wherein he counerpary is a cusomer. •
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Revenue – is “income arising in he course of an enty’ enty’ss ordinary actvites” Contract – is “an agreemen beween wo or more partes ha creaes enforceable obligaton”. A conrac can be wrien, oral, or implied by anrighs entyand enty’ ’s cusomary business practce.
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Customer - is “a pary ha has conraced wih an enty o obain goods or services ha are an oupu of he enty's ordinary actvites in exchange for consideraton.
Core Principle An entity recognizes revenue to depict the t he transfer of promised goods or services to customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or service.
Steps in the Recognition of Revenue PFRS 15 requires he following seps in recognizing revenue: •
Step 1: Identfy he conrac wih he cusomer
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Step 2: Identfy he performance obligatons in he conrac
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Step 3: Deermine he ransacton price
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Step 4: Allocae he ransacton price o he performance obligaton obligat on in he conrac Step 5: Recognize revenue when (or as) he enty satses a performance obliga obligaton ton
Step 1: Identify the contract with the
customer
Requiremens before before a conrac wih a cusomer is accouned for under PFRS 15: a) The co conrac ac mu mus be be approved and and he conractng partes are commited o i; idenfable; b) Rig igh hs an and pa paym yme ens erms are idenfable; c) The conrac has commercial subsance; subsance; & d) Th The e co cons nsid ider erat aton on is is probable probable o collecon. collecon.
No revenues is recognized if the contract does not meet the criteria above. Any Any consideration received sis recognized as liability
Definition of Construction Contract •
Construction
Contract
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is a conrac
specically for heofconsructon of an assesnegotaed or a combinaton asses ha are closely inerrelaed or inerdepend in erms of he design, echnology and functon or heir ultmae purpose or use.
Combination of Contracts
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Each conrac is accouned for separaely
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However, wo or more conracs enered ino a or near he same tme wih he same cusomer (or relaed partes of he cusomer) shall be combined and accouned for as a single conrac if: a) The conr conrac ac are are negota negotaed ed as a package package wih wih a single single commer commercial cial b) objectve; The amoun amoun of consider consideraton aton o o be paid in in one con conrac rac depen depends ds on he price or performance of he oher conrac; or c) Some or all of he goods or or services services prom promised ised in in he con conrac racss are a single single performance obligaton.
obligationss Step 2: Identify the performance obligation in the contract
Each promise in a conrac o ransfer a disnc good good or services is reaed as a separae performance obligaton.
Identifying distinct goods or services A good or services ser vices is distnc if: a)
The customer can benet from it, eiher on is own or ogeher wih oher resources ha are readily available o he cusomer (e.g., he good or service is regularly sold separaely); and
b) The The go good od or se serv rvic ice e is separately idenable (i.e., no an inpu o a combined oupu, does no signicanly modify he oher promises, or no highly inerrelaed wih he oher promises.)
A good or service that is not distinct shall be combined with the other promises in the contract. Combines promises are treated treated as a single performance obligation
Satisfaction of Performance Obligation A conrac incepton, he enty shall deermine •
wheher he idented performance obligaton will be satsed eiher:
1.Over time; or 2. At a point in time
Performance obligation satisfied over time
A performance obligaton is satsed over me if one of he following crieria is me: a) The cu cusomer simultaneously receives and consumes the benefts provided by he enty’ enty ’s performance as he enty performs. b) The enty's enty's perf performanc ormance e creaes creaes or enhances enhances an an asses asses (e.g., (e.g., work work in progress) ha the customer controls as he asses is creaed or enhanced. c) The The ent enty’ y’ss perf perfor orma manc nce e does does not not creae an asses with an alternave use use o he enty and he enty has an enorceable right to payment or perormance completed to date.
Performance obligation satisfied at a point in time If he enty canno demonsrae ha a performance obligaton is satsed over tme, i is presumed ha he performance obligaton is satsed at a point in time.
Step 3: Determine the transaction price •
The enty shall deermine he ransacon price because his is he amoun a which revenue will be measured
Transaction price – is “the amount of consideration to which an entity expects to be entitles in exchange for transferring promised goods or tothird a customer, excluding amounts collected onservices behalf of parties (e.g., some sales taxes).” The consideration may include fixed amounts, variable amounts, or both.
Step 3: Determine the transaction price – cont’d •
In a consructon conrac, conrac, he ransacton price normally consiss of he follo following: wing: 1. The co con nrrac pri price; ce; and 2. An Any y subse subsequen quen variato variatons ns in he con conrac rac price o o he exen ha i is probable ha hey will resul in revenue and hey are capable of being measured reliably.
Step 3: Determine the transaction price – cont’d •
A consructon conrac may be eiher 1. Fix Fixed ed pric pricee contr contract act;; or 2. Co Cost st plu pluss cont contra ract ct.. a) Cos – plus – variabl variable e – fee fee conr conrac ac b) Cos – plus – xed xed – fee fee con conac ac
Step 4: Allocate the transaction price to the performance obligations obligations •
The ransacton price shall be allocaed o each performance obligaton idented in a conr conrac ac based on he relave sand – alone prices of he distnc goods or services promised o be ransferred.
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The sand – alone selling price is he price a which a promised good or service can be sold separaely separaely o a cusomer.
Step 5: Recognize 5: Recognize revenue revenue when when (or as) the entity satisfies a performance obligation •
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A performance obligaton is satsed when he control over a promised good or service is ransferred o he cusomer. at the amount o the transacon price Revenue is measured at allocated o he satsed performance obligaton
Measuring progress towards complete satisfaction of a performance obligation For each performance obligaton satsed over tme, an •
enty shall recognize revenue over tme by measuring he
progress owards complee satsfacton of he performance obligaton. •
Example measuremen mehods: beween coss incurred 1. In Inpu putt of meaccepable meth thod odss (e.g., relatonship o dae and oal expeced coss) 2. Ou Outp tput ut me meth thod odss (e.g., surveys of work performed)
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Inputs method
Inpus mehods recognize revenue on he basis of eorts or inputs expended relatve o he oal expeced inpus needed o fully satsfy a performance obligaton obligaton..
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Example of eors or inpus include: 1. 2. 3. 4.
Coss in incurred Res esou ourrce cess co cons nsum umed ed Labo La borr hou hourrs exp xpen ende ded d Mach Ma chin ine e hou hourrs us used
5. Time elapsed
Formula #1
Cost – to – Cost
Percentage of Completion
Formula #2 A variaton of he formula above is presened below:
Percentage of Completion
Revenue in 20x1 is compues as follows: Percentage of Completion
Percenage Percen age of completon = 1.2M ÷ 4M Percenage Percen age of completon = 30%
Revenue in 20x1 = Contract price Revenue in 20x1 = 6M x 30%
Revenue in 20x1 = ₱ 1,800,000
Percentage of completion
Case 2: Estimated 2: Estimated costs to complete The actual costs incurred in 20x1 are ₱1.2M. The estimated cost to complete as od Dec. 31, 20x1 are ₱2.8M
Requirement: How much revenue is recogniz recognized ed 20x1? Soluon: Percentage of Completion Percenage Percen age of completon = 1.2M ÷ (1.2M ÷ 2.8M) Percenage P ercenage of completon = 1.2M ÷ 4M Percenage of completon = 30%
Revenue in 20x1 = Contract price Revenue in 20x1 = 6M x 30%
Revenue in 20x1 = ₱ 1,800,000
Percentage of completion
Efforts – expended (labor hours – based) method Anoher applicaton of he inpus mehod is he eorts – expended (labor hours – based) method. method. Under his mehod, he percenage of completon is based on he “eors expended” in completng he conrac – normally in direc labor hours, raher han on coss. This mehod is mos commonly used by general conracors whose pros are direcly relaed on how hey manage subconracors raher han from he value of he subconracs hemselves. hemselves.
The percenage of completon is compued as follows: Percentage of Completion
or Percentage of Completion
Percentage of Completion
20x1 Percenage Percen age of completon = 400 ÷ (400 + 1,600)
20x2 Percenage Percen age of completon = 1,500 ÷ (1,500 + 375)
Percenage of completon = 400 ÷ 2,000
Percenage of completon = 1,500 ÷ 1,875
Percentage of compleon as at Dec. 31, 20x1 = 20%
Percentage of compleon as at Dec. 31, 20x2 = 80%
The percentage completed completed in 20x2 is 60% (80% minus 20%)
Contract costs
Conrac coss include he following:
recognized ed as assets a) Inc Increm rement ental al co costs sts o obt obtain aining ing a con contra tract ct – recogniz if hey are recoverable and avoidable. As a practcal expedien, he coss are recognized as expense if heir expeced amortzaton period in 1 year or less b) Co Cost st to u ulf lfll ll a co cont ntra ract ct – if wihin he scope of PFRS 15, hey are recognized recogniz ed as asse if hey are: i. Dir Direc ecl ly y rel rela aed ed o a con conr rac ac; ; ii.. Ge ii Gene nerra ae e or or enh enhan ance ce res resou ourc rces es;; & iii ii.. Recov ove erab able le
Percentage of Completion
Percenage of completon = 4,500,000 ÷ 10,000,000 Percenage o compleon = 45%
Presentation
A conrac where eiher pary has performed is presened in he saemen of nancial positon as a conrac liability, contract asset or receivable. •
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Contract Liability – is a enty’s obligaton o ransfer goods or services o a cusomer for which he enty has received consideraton (or he amoun is due from he cusomer. Contract asset – is an enty’s righ o consideraton in exchange for goods or services ha he enty has ransferred o a cusomer when ha righ is conditoned on somehing oher han he passage of tme. Receivable Rece ivable – is an enty’s righ o considered ha is uncondional.
Remember the Scenario following: Consideraton is received or becomes due before goods or services are ransferred o he
Accounting
Recognize a conrac liabiliy
cusomer. Goods or services are ransferred o he cusomer before consideraton is received:
a. Righ Righ o o consid considerat eraton on is is condit conditonal onal b. Righ Righ o consi consider deraton aton is uncondi unconditonal tonal
Recognize a conrac asse Recognize a receivable
Accounting for construction contracts
UNDER PFRS Contract asset is recognized when the entity performs 15 but its right to consideration consideration is still still conditional. conditional. Once the entity’s right to consideration becomes unconditional, the contract asset is reclassified as
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receivable. Contract liability is recognized if the consideration is received or becomes due before the entity performs.
Illustration 1: Percen Percentage tage of completion (cost-to-cost/ input method) On Jan. 1 2021, ABC eners e ners ino ino a conrac o consruc a building for a cusomer. ABC identes is performance obligaton o be satsed over tme. ABC uses he inpu mehod based on coss o measure is progress on he conrac. The conrac price is P9M. 2021
2022
2023
2,760,000
3,540,000
500,000
b. Bi l l i ngs pe r ye ar
50%
30%
20%
c. Coll e ct ons on bil l i ngs pe r ye ar
90%
90%
bal ance
4,140,000
700,000
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a. Conrac coss incurre d pe r year
d. Estmaed cos o complee ( a ye ar e nd)
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The buildings per year are saed as percenages of he conrac price. The conrac is non-cancellable The collectons on billings in 2021 and 2022 are ne of 10% reenton. “Reenon” is he an conracor amoun wihheld he conracee and payable o a he endbyof he conrac when he projec is compleed and acceped.
A. Compute for the gross gross profits, revenues revenues and costs of construction in 2021, 2022, and 2023
GROSS PROFIT Toal conrac pri ce
2021 9,000,000
2022 9,000,000
2023 9,000,000
a. Coss i ncurre d o dae
2,760,000
6,300,000
6,800,000
Add: Est maed cos o comple e b. Est mae d oal conrac coss
4,140,000 6,900,000
700,000 7,000,000
6,800,000
Expeced gross pro Mul t pl y by: % of compl et on ( a/b)
2,100,000 40%
2,000,000 90%
2,200,000 100%
Gross pro e arne d o dae Le ss: Gross pro i n pri or years
840,000 0
1,800,000 (840,000)
2,200,000 (1,800,000)
G ross pro t for the ye ar
840,000
960,000
400,000
REVENUE
2021
2022
2023
Toal conrac pri ce
9,000,000
9,000,000
9,000,000
Mul t ppl y by: % of compl e t on Re ve nue o dae Less: reve nue re cogni ze d In pri or years
40% 3,600,000 0
90% 8,100,000 -3,600,000
100% 9,000,000 -8,100,000
Revenue for the year Cos of consruct on
3,600,000 (2760000)
4,500,000 (3540000)
900,000 (500000)
840,000
960000
400000
Gross pro for he year
2021 Journal entries a. Inccurence of cost Tradional Tr adional accounng Construcon in progress Cash (or other account)
PFRS 15
2,760,000 Conrac coss 2,76 2, 760, 0,00 000 0 Cash (or oher accoun) Cash
2,760,000 2,760,000
b. billing Tradional accounng Tradional 4,500,000 Accounts receivable Progress billings
B. Provide Journal Entries
(9M*50%)
4,500,000
c. collecon Tradional Tr adional accounng 4,050,000 Cash (4.5M*90%) Accounts receivable
4,050,000
d. revenue recognion Tradional Tr adional accounng Cost of Construcon 2,760,000 Construcon In progress 840,000 Revenue
PFRS 15 Receivable
4,500,000
Conrac liabiliy
4,500,000
PFRS 15 Cash Receivable
4,050,000 4,050,000
PFRS 15 Conrac li liabiliy 3,600,000 Revenue 3,600,000
3,600,000 Cos Cos of of Co Consructon
2,760,000
Conrac coss
20 2022 22 Journal entries
Traditonal accountng Consructon in progress
Cash
Accouns recei vabl e
Progress bil li ngs (9M*30%)
Cash (2.7M*90%)
Accouns recei vabl e
PFRS 15
3,540,000 3,540,000 2,700,000 2,430,000
Recei vable Conrac l iabi l iy Cash
2,430,000 3,540,000
Consructon in progress
960,000
Revenue
Cash
2,700,000
Cos of consructon
Conrac coss
Recei vable Conrac l iabi li y Revenue
3,540,000 3,540,000 2,700,000 2,700,000 2,430,000 2,430,000 4,500,000 4,500,000
4,500,000 Cos of consructon
Conrac coss
3,540,000 3,540,000
2,760,000
2023 Journal entries
Tradi t onal account ng Consruct on i n progre ss 5,000,000 Conrac coss Ca C ash 5,000,000 Cash A ccouns re ce i vabl e 1,800,000 Re ce i vabl e Progre ss bi l l i ngs (9M*20% ) Cas h A ccouns re ce i v abl e Cos of consruct on Consruct on i n progre ss Re v e n u e Progre ss bi l l i ng Consruct on i n progre ss (to eliminate the accounts)
1,800,000 Conrac l i abi l i y 2,520,000 Cash 2,520,000 Re ce i vabl e 500,000 Conrac l i abi l i y 400,000 Re v e n u e 900,000 9,000,000 Cos of consruct on 9,000,000 Conrac coss
PFRS 15 5,000,000 5,000,000 1,800,000 1,800,000 2,520,000 2,520,000 900,000 900,000 500,000 500,000
C. Determine the amounts presented in the financial statements ABC Co. Statement of nacial posion Tradit onal account ng Curre n asse s Accoun rece ivabl e Consruct on in progre ss
2022
450,000
7 72 20,000 8,100,000
Le ss: Progress bi ll i ngs
2023
Curre n asses
2021
2022
Recei vabl e Conrac asse
450,000
720,000 900,000
Toal
450,000
1,620,000
2023
7,200,000
Gross amoun due from cusome r Toal
PFRS 15
2021
900,000 450,000
1,620,000
0
0
ABC Co. Statement of prot or loss
Re v e n u e Cos Cos of cons ons ru ruccton Gro ss p ro
Trad i t o n al acco u nt n g 2021 3, 600,000 -2 -2,7 ,76 60,0 ,00 00 840,000
2022 4,500,000 -3 -3,5 ,54 40,0 ,00 00 960,000
2023 900,000 -5 -50 00,0 ,00 00 400,000
Re v e nu e Cos Cos of cons ons ru ruccton Gro ss pro
PF RS 15 2021 3,600,000 2,7 ,76 60,0 ,00 00 840,000
2022 4, 500,000 3,5 ,54 40,0 ,00 00 960,000
2 20 023 900,000 -50 -500,0 ,00 00 400,000
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Output Methods
Oupu mehods recognize revenue on he basis of direc measuremens he relatve value o o hehe cusomer of hegoods goodsor or services ransferred o of dae remaining services promise under he conrac.
Example: a) Surve Surveys ys of of perf perfor orman mance ce com comple plee ed d o o dae dae b) App Apprais raisals als of resul resuls s achieve achieved, d, miles milesones ones reach reached, ed, tme tme elapsed elapsed and and unis unis produced or unies delivered.
SOLUTION N o. of ki l om e e rs com pl e e d o dae Divide by: TToal oal kilomee kilomeers rs o be com pl e e d Pe rce ntage of comple on to date
2021 10.25
2022 32.8
41 25%
41 80%
PROFITS •
Estmaed oal conrac cos are equal o he cos incurred o dae plus estmaed coss o complee a each year-end. These are compued as follows: •
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2021: (2.3B+7.7B)= 10B 2022: (2.3B+5.5B+2.4B)= 10.2B
2021
2022
13B
13B
(10B)
(10.2B)
3B
2.8B
Mul tpl y by: % of compl eton
25%
80%
Pro o dae
750M
2.24B
--
(750M)
Toal conrac pri ce Less: Estmaed oal conrac cos Expeced oal pro from consructon
Less: Pro recogni zed i n pri or years
Prot for the year
750M
1.49B
REVENUES AND COSTS C OSTS OF CONSTRUCTION 2021
2022
Toal conrac price
13B
13B
Multply by: % of completon
25%
80%
Conrac revenue o dae Less: Conrac revenue recognized in pri or years
3.25B --
10.4B (3.25B)
Conrac revenue for he year
3.25B
7.15B
Less: Cos of consructon (SQUEEZE)
(2.5B)
(5.66B)
Prot for the year
750M
1.49B
Unlike the cost-to-cost method, under the output method, the cost of construction is not equal to the actual costs incurred in that
period.
Reasonable measures of progress
Changes in measure of progress •
The measure of progress is updaed as circumsances change over tme o reec any changes in he oucome of he performance obligaton.
Revenue for a performance obligaton satsed over tme is recognized only if he progress owards he complee satsfacton of he performance obligaton can be reasonably measured.
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If he oucome of a performance obligaton canno be reasonably measured, revenue is recognized only o he exen o coss incurred ha are expeced o be recovered.
Onerous Contracts
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An onerous conrac is a conrac in which he unavoidable coss of meetng he obligatons o bligatons under he conrac exceed he economic benes expeced o be received under i.
Expeced losses in Onerous Conracs: Conracs: •
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PSA 11 (old standard) – When i is probable ha oal conrac coss will exceed oal conrac revenue, he expeced loss is recognized immediaely as expense. PFRS 15 (current standard) – As soon as a conrac becomes onerous, an enty recognizes a provision for he loss i expecs o incur on he conrac in
accordance wih PAS 37 Provisions, Conngent Liabilies and Conngent Assets.
SOLUTION
The conrac is analyzed as follows:
2021 2022 2023 Conrac pri ce 1,000,000 1.000,000 1,000,000 Conrac coss N /A 1,100,000 1,020,000 Ex pe ce d pro / l oss N /A (100,000) ( 20,000)
SOLUTION
The conrac is onerous in 2022. The pros (losses) are a re deermined as follows:
Re v e n u e Con Co nrrac ccos oss s in incccured ured per yea yearr G ro s s p ro p e r y e a r Lo ss o n o n e rou s co nrac G a i n o n re v e rs a l o f p ro v i s i o n P ro ( l o s s ) f o r h e y e a r
2021 2022 2023 200, 000 625, 000 175, 000 (2 (2000,00 ,000) (6 (6225,00 ,000) (1 (1995,00 ,000) -----
-( 100, 000) -( 100, 000)
( 20,000) -100, 000 80,000
Variable Consideration If he consideraton includes a variable amoun, he enty shall estmae he amoun o which i will be entled in exchange for ransferring he promised goods or
services o he cusomer. cusomer. The amoun of variable consideraton is estmaed using eiher of he following mehods, depending on which mehod is expeced o beer predic he amoun o which he enty will be entled. •
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Expected Value – he sum of probabiliy-weigh probabiliy-weighed ed amouns in in a range of possible amouns. This may be appropriae when he enty has a larger number of conracs wih similar characeri characeristcs. stcs. Most likely amount – he single mos likely likely amoun in a range range of possible amouns. amouns. This
may appropriae when here are only wono.) possible oucomes (for example, an enty eiherbeachieves a performance bonus or does
Example : Estimating variable consideration A consructon conrac saes a price of P1M. However, for each day ha he completon is delayed aer he deadline, he conrac price decreases by P1,000, whereas for each day ha he completon is earlier han he deadline he conrac price increases by P1,000. In additon, upon completon, a hird pary will inspec he asse and assign a ratng based on merics dened in he conr conrac. ac. If a specied ratng is me, he enty will receive a bonus of P20,000. Analysis: The consideraton includes a xed amoun of P1M and a variable amoun, which he enty needs o estmae using he mehods described earlier. •
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Expeced value mehod- o estmae he variable consideraton associaed wih he daily penaly or incentve because here can be a range of possible amouns (P1M plus or minus P1,000 per day). Mos likely amoun- o estmae he variable consideraton associaed wih he incentve bonus
because here can only be wo possible oucomes ( +P200,000 or +P0 )
Incentive Payments Incentve paymens are additonal amouns paid o he conracor if specied performance sandards are me or exceeded. (ex; a conrac may allow for an incentve paymen o he conracor for early completon of he conrac).
Cost Escalations Cos escalaton is a conracual provision ha stpulaes an increase in he conrac price in he even of an increase in cerain coss. For example, an escalaton clause may specify ha he conrac price will increase wih inaton o safeguard he conracor from price changes in
maerials and labor.
SOLUTION Inital conrac price- P1,000,000* P1,000,000*105%(5% 105%(5% increase)= P1,050,000 Toal conrac price a. Coss incurre d o dae Est mae d coss o compl e e b. Es Estm tmaae d o oal ccoonrac ccooss Ex pe ce d gross pro ( l oss) Mult pl y: % of compl e ton ( a/b) Gross pro ( loss) o dae Gross pro in prior ye ars
2021
2022
1,000,000 224,000 476,000 700,000 300,000 32% 96,000 --
1,050,000 518,000 222,000 740,000 310,000 70% 217,000 ( 96,000)
G ross pro t for the ye ar
96,000
121,000
Contract Modifications A conrac modicaton is a change in he scope and/or price of a conrac ha is approved by he conractng partes, in writng, orally or implied by cusomary business practces. Similar erms are “change “c hange order order””, “variaton” “variaton”,, and “amendmen “amendmen””. A conrac modicaton is accouned for as a separae conrac if boh of he following conditons are me: a.
The sco The scope pe of h he e con conr rac ac inc incre reas ases es be beca caus use e of of he he ad addi dito ton n of of promised goods or services ha are distnc; and
b.
The con The conr rac ac pric price e incr increa ease sess by an amo amoun un ha ha re ree ec css he he sa sand nd-alone selling prices of he additonal promised goods or services.
A contract modification that is for notas accounted separate contract is accounted follows: for as a a)
If he he add addit iton onal al good goodss or se servi rvice cess are are dist distnc nc bu bu he he incr increa ease se in in he conrac price does no reec he sand-alone selling price, he conrac modicaton is accouned for as i i were a erminaon o he exisng conrac and he creaon o a new conrac.
b)
If h he e add addit iton onal al go good odss or or serv servic ices es ar are e no no di dist stnc nc, , h hey ey ar are e essentally par of a single performance obligaton ha is only partally satsed. Therefore, he conr conrac ac modicaton is accouned for as i i were a par o he exisng conrac.
Uncertainty in the Collectability of Contract Revenue Contract inception If he uncerainy in he collecabiliy of conrac revenue arises a conrac conrac. incepton, he enty does no recognize any revenue from he Any consideraton as revenue only when eiher of he following has occurred: a) The ent enty y has no rem remainin aining g obligat obligaton on o ra ransf nsfer er goods goods or servi services ces o o he cusomer and all, ir subsantally all of he consideraton has been received and is non-refundable. b) The con conrac rac has been been ermin erminae aed d and he he consid considera eraton ton recei received ved is is non-
refundable.
Subsequent period
If he uncerainy in he collecabiliy of conrac revenue arises subsequen o conrac incepton, he un-collecabiliy is accouned for as
impairmen o rade asses. receivables and/or conrac
SOLUTION
2021
2022
Toal conrac price
10,000,000
10,000,000
a. Coss inccured o dae
2,400,000
4,500,000
Estm tma aed coss o comple lee
3,6 ,60 00,000
1,500,000
b. E Est stm mae ed d o oal ccon onr ra ac cos sss
6,0 ,00 00,0 ,00 00
6,0 ,00 00,0 ,00 00
Expeced pro (loss)
4,000,000
4,000,000
40%
75%
1,600,000
3,000,000
--
(1,600,000)
1 1,6 ,60 00,0 ,00 00
1,4 ,40 00,0 ,00 00
--
(1,000,000)
Multply: % of completon (a/b) Pro (loss) o dae Pro recogni zed in prior years To oa al Impairmen loss on receivable
Prot for the year
EROJANO KENZO
1,600,000
400,000
PRESENTOR S
TH ANK Y OU! OU! FOR L I S T E N I N G
GUEMO
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