1 / 42

ACCOUNTING STANDARD-7 CONSTRUCTION CONTRACTS Revised 2002 Presented by:-

IntroductionObject and scopeOld v/s Revised ASBasic TerminologyCombining and SegmentingContract revenue and adjustment to it.Contract CostRecognition of Contract Revenue and costIssues Related to recognitionDisclosures. Points Covered. CA Gaurav Rawat, 9414783674. 2. This AS issued by

reuel
Télécharger la présentation

ACCOUNTING STANDARD-7 CONSTRUCTION CONTRACTS Revised 2002 Presented by:-

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

    1. ACCOUNTING STANDARD-7 CONSTRUCTION CONTRACTS (Revised 2002) Presented by:- Gaurav Rawat B.com., ACA 1

    2. Introduction Object and scope Old v/s Revised AS Basic Terminology Combining and Segmenting Contract revenue and adjustment to it. Contract Cost Recognition of Contract Revenue and cost Issues Related to recognition Disclosures Points Covered CA Gaurav Rawat, 9414783674 2

    3. This AS issued by ICAI comes into effect in respect of all the contracts entered into during accounting period commencing on or after 01.04.2003 and is mandatory in nature from that date. Therefore from that date Accounting Standard(AS) 7, Accounting for Construction Contracts, issued by institute in December 1983 is not applicable in respect of such contracts INTRODUCTION CA Gaurav Rawat, 9414783674 3

    4. OBJECTIVE Main objective is to prescribe the accounting treatment of revenue and costs associated with construction contracts Allocation of contract revenue and contract costs to the accounting periods in which construction work is performed. Determines when contract revenue and contract costs should be recognized as revenue and expenses in the statement of profit and loss. SCOPE This statement is applied in accounting for construction contracts in the financial statements of contractors. OBJECTIVE AND SCOPE CA Gaurav Rawat, 9414783674 4

    5. Old v/s Revised CA Gaurav Rawat, 9414783674 5

    6. Construction Contract Contract specifically for the construction of an asset or combination of assets that are closely interrelated / independent in terms of their design, technology and function or their ultimate purpose or use. Fixed Price Contract Contract in which the contractor agrees to fix contract price or a fixed rate per unit of output which may be subject to escalations. Cost Plus Contract Contract in which the contractor is reimbursed for costs, plus percentage of these costs or a fixed fee. BASIC TERMINOLOGY CA Gaurav Rawat, 9414783674 6

    7. It includes:- Contracts for the rendering of services which are directly related to the construction of the assets, for example, those for the services of project managers and architects; Contracts for destruction or restoration of asset, and the restoration of the environment following the demolition of assets. This included in the revised AS 7 and was not finding place in the previous AS7 CONSTRUCTION CONTRACTS CA Gaurav Rawat, 9414783674 7

    8. For applying this AS each construction contract is treated separately but sometimes it is combined or segmented:- Contract of number of assets should be treated as separate construction contract when:- Separate proposals have been submitted for each assets, Each asset has been subject to separate negotiation and the contractor and customer have been able to accept or reject that part of the contract relating to each asset. Costs and revenue of each asset can be identified. Group of contract, with single/several customers should be treated as single contract when:- Contracts is negotiated as a single package. Contracts are so interrelated that they are a part of single project with an overall profit margin. Contracts are performed in continuous sequence . Combining and Segmenting CA Gaurav Rawat, 9414783674 8

    9. Construction of an additional asset should be treated as a separate construction contract when:- Asset differ significantly in design, technology or function from the asset/assets covered by the original contract. Price of the asset is negotiated without regard to the original contract price. Combining and Segmenting CA Gaurav Rawat, 9414783674 9

    10. Contract Revenue comprises of:- the initial amount of revenue agreed in the contract Variations in contract work, claims and incentive payments; To the extent that it is probable that they will result in revenue. They are capable of being reliably measured. Further, the amount of contract revenue may increase or decrease from one period to the next Due to variations and claim, Due to cost escalation clauses Due to penalties If no. of units increase in fixed price contracts. CONTRACT REVENUE CA Gaurav Rawat, 9414783674 10

    11. When to Recognize variations:- Adjustments to contract Revenue

More Related