LONG TERM

CONSTRUCTION
CONTRACT

REVENUE RECOGNITION Revenue – income arising in

PRINCIPLE UNDER PFRS 15 the course of an entity’s

Identify the contract ordinary activities.

with the customer. Contract – an agreement

Identify performance between two or more parties

obligations in contract. that creates enforceable

rights and obligations.

Determine the Customer – a party that has

transaction price. contracted with an entity to

Allocate transaction obtain goods or services that

price to perf. are an output of the entity’s

obligations ordinary activitiesin

Recognize revenue exchange for consideration.

when (or as) a

performance

obligation is satisfied

CONSTRUCTION
CONTRACT
contract specifically negotiated for the construction of an

asset or a combination of assets that are closely interrelated or

interdependent in terms of their design, technology and

function or their ultimate purpose or use.

MEASUREMENT
INPUT OUTPUT
METHODS METHODS
Cost to cost Surveys of performance

Resources consumed completed to date.

Labor hours expended Appraisals of results achieved,

Machine hours used milestones reached, time elapsed

Time elapsed and units produced or units

delivered.

PRESENTATION
Contract liability – an entity’s obligation to transfer goods or

services to a customer for which the entity has received

consideration (or the amount is due) from the customer.

Contract asset – an entity’s right to consideration in exchange

for goods or services that the entity has transferred to a

customer when the right is conditionedon something other than

the passage of time.

Receivable – is an entity’s right to consideration that is

unconditional. Consideration is unconditional if only the

passage of time is required before payment of that

consideration is due.

Consideration is received or becomes due before goods or

services are transferred to the customer = recognize a
contract liability.
Goods or services are transferred to the customer before
consideration is received:
a. Right to consideration is conditional = recognize a contract
asset
b. Right to consideration is unconditional = recognize a
receivable