Revenue Recognition for Construction Contracts
Revenue Recognition has been a hot button issue for my company recently and the methods used in construction can vary greatly from those accepted in other industries. The preferred methods are: Percent Complete, which is computed using estimates of the ending gross margin of the job. As costs are incurred revenue is recognized in proportion to costs incurred. This method is rather unique in the accounting world as it relies on estimates which can vary from month to month for computing the revenue to recognize. Completed Contract, is used primarily for smaller jobs where doing percent complete is too cumbersome. It is conservative by nature since all revenues are deferred until completion. I'm interested in any color users can add to this discussion. I've also got some good gaap interpretations about the topic which I'll post to the site soon.