#cfa-level-1 #reading-25-understanding-income-statement #revenue-recognition
Under the
percentage-of-completion method, in each accounting period, the company estimates what percentage of the contract is complete and then reports that percentage of the total contract revenue in its income statement.
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3.2.1. Long-Term Contractse of a construction contract can be measured reliably, revenue and expenses should be recognized in reference to the stage of completion. US GAAP have similar requirements for long-term contracts including construction contracts.
<span>Under the percentage-of-completion method, in each accounting period, the company estimates what percentage of the contract is complete and then reports that percentage of the total contract revenue in its income statement. Contract costs for the period are expensed against the revenue. Therefore, net income or profit is reported each year as work is performed.
Under IFRS, if the outcome of th Summary
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