IPSAS Explained: A Summary of International Public Sector Accounting Standards, 2nd Edition

IPSAS 11: Construction Contracts

Objective

IPSAS 11 regulates the accounting treatment of revenue and costs associated with construction contracts in the financial statements of public sector entities acting as contractor under such contract. The standard

Identifies the arrangements that are to be classified as construction contracts,

Provides guidance on the types of construction contracts that can arise in the public sector, and

Specifies the basis for recognition and disclosure of contract expenses and, if relevant, contract revenues

Because of the nature of the activity undertaken in construction contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different reporting periods.

In many jurisdictions, construction contracts entered into by public sector entities will not specify an amount of contract revenue. Rather, funding to support the construction activity will be provided by an appropriation or similar allocation of general government revenue, or by aid or grant funds. In these cases, the primary issue in accounting for construction contracts is the allocation of construction costs to the reporting ...