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Generally Accepted Accounting Principles |
| U.S. GAAP-Codification | IFRS International Standards | Accounting Standards, ASC |
Long-Term Construction-Type Contracts
(ARB No. 45)
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| Accounting Research Bulletin (ARB) No. 45 |
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Accounting Research Bulletin (ARB) Opinion
No. 45 a. Long-Term Construction-Type Contracts b. Issued in October 1955 ARB No. 45 does
not cover CPFF contracts.--> Cost-Plus-Fixed-Fee (CPFF) contracts are covered by ARB No. 43 (Chapter 11A). Generally
Accepted Methodsa. Percentage-of-Completion Method b. Completed Contract Method Percentage-of-Completion Method Income is
recognized as--> percentage of estimated total income. Percentage
of completion--> costs incurred to date / estimated total costs Costs and
recognized income not yet billed--> current assets Billings
in excess of costs and recognized income--> current liabilities If
total contract is estimated to be a loss,--> provision should be made for the loss on the entire contract. Completed-Contract Method Income
is recognized--> only when the contract is (substantially) completed. Recording of
income prior to completion--> is not permitted. If
total contract is estimated to be a loss,--> provision should be made for expected losses. Selection of Method Estimates are
needed for the followings:a. Costs to complete b. Extent of progress toward completion If
the above estimates are reasonably dependable,--> percentage-of-completion method is preferable. If
the above estimates are not dependable,--> completed-contract method is preferable. |
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