Page 95 - IC26 LIFE INSURANCE FINANCE

The stage of completion of a contract may be determined by following ways;

 surveys of work done

 completion of physical proportion of the contract work

 the proportion that contract costs incurred for work performed upto

 the reporting date bear to the estimated total contract costs

When a contract covers a number of assets, the construction of each asset should be treated as a separate

construction of each asset should be treated as separate construction contract when separate proposals

have been submitted for each asset; each asset has been subject to separate negotiation the costs and

revenues of each asset can be identified.

A group of contracts, whether with a single customer or with several customers, should be treated as a

single construction contract when the group of contracts is negotiated as a single package; the contracts are

very closely interrelated the contracts are performed concurrently or in a continuous sequence.

The recognition of revenue and expenses in construction contract is based on reliable estimate. This

estimate may vary from one accounting year to another accounting year.

The effect of change in estimate should be treated as per AS-5. i.e. It should not be treated as prior period

item or extraordinary item.

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