LONG TERM CONSTRUCTION CONTRACTS – PFRS 15

PERCENTAGE OF COMPLETION COST RECOVERY METHOD

Estimated Gross Estimated Gross Estimated Gross Estimated Gross
Profit Loss Profit Loss
Construction Based on the Based on the Cost incurred Cost incurred
Revenue percentage of percentage of during the year during the year
completion completion
Cost of Cost incurred Construction Cost incurred Cost incurred
Construction during the year Revenue during the year during the year
+RGL +RGL
-RGP -RGP
Progress Cumulative Cumulative Cumulative Cumulative
Billings Billings Billings Billings Billings
Construction Contract price x Cumulative cost Cumulative Cumulative cost
in Progress Percentage of – cumulative GL costs – cumulative GL
Completion
(only used in the year
of expected GP)

Cumulative
costs
+ cumulative
GP

BB CIP
Add:
Costs during the Year CIP > PB  Current Asset
RGP CIP < PB  Current Liability
Less: offsetting is allowed only on a per project
basis
RGL
EB CIP

BB PB
Add: Billings
EB PB

ENTRIES:
Construction in progress xx to record costs incurred
Cash or Accounts Payable
xx
Accounts Receivable xx to record progress billings

Progress Billings xx
Cash xx to record collections
Accounts Receivable
xx
Construction Expenses xx to recognize revenue, costs, and GP
LONG TERM CONSTRUCTION CONTRACTS – PFRS 15
Construction in Progress
xx
Revenue from Construction
xx
Progress Billings xx to close CIP and PB accounts
Construction in Progress
xx