O'Reilly logo

Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Long‐Term Construction Contracts. Perspective and Issues

Accounting for long‐term construction contracts involves questions as to when revenue is to be recognized and how to measure the revenue to be recorded. The basic GAAP governing the recognition of long‐term contract revenue is contained in ARB 45, Long‐Term Construction‐Type Contracts, AcSEC Statement of Position 81‐1, Accounting for Performance of Construction‐Type and Certain Production‐Type Contracts, and the AICPA Audit and Accounting Guide for Construction Contractors.1 In accordance with SAS 69, Accounting Research Bulletins (ARB) are “category A” (the highest level) GAAP, and SOP 81‐1 and the Audit and Accounting Guide are “category B” GAAP.

The accounting for long‐term construction contracts is complicated by the need to rely upon estimates of revenues, costs to be incurred, and progress toward completion.

Table . 10-1: Sources of GAAP
CONARBAPBFASSOP
5452010981‐1, 98‐5

Definitions of Terms

Back chargesBillings for work performed or costs incurred by one party (the biller) that, in accordance with the agreement, should have been performed or incurred by the party billed.
Change orderA legal document executed by a contractor and customer (which can be initiated by either) that modifies selected terms of a contract (e.g., pricing, timing and scope of work) without the necessity of redrafting the entire contract.
ClaimsAmounts in excess of the agreed contract price that a contractor seeks to collect from customers for ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required