IAS 11 Construction Contracts

1. Prudence

   Nota:

   • Prudence would require that no income or profits are anticipated until realised
2. Matching

   Nota:

   • Matching requires that costs are matched to the income they generate in the same period
3. Fair presentation

   Nota:

   • The income statement should be a fair presentation of an entity's position therefore matching wins

Nota:

• watch out for this, just because the word construction is used does not mean it constitutes a construction contract under IAS 11

1. Reasonable Certainty

   Nota:

   • where income cannot be estimated with reasonable certainty, the income statement must still reflect the activity for the period and as such revenue is matched against cost showing no profit or loss Payments on account DO NOT represent the revenue figure
2. Proportion of Work Done

   Nota:

   • Work is certified by professional surveyors.
3. Specific points
4. Profitable Contracts

   Nota:

   • Contract profit is usually recognised based on the percentage of work completed and the cost of sales becomes the balancing figure
   1. Cost of Sale

      Nota:

      • Crucial Exam point, calculated as a balancing figure