The completed-contract method (CCM) is easier to account for than the percentage-of-completion method (PCM). Because the process of measurement requires focused attention, knowledge, and creativity: Few …

Contractors under this threshold qualified to use a method of accounting for long-term contractors other than percentage-of-completion. Completed Contract: An Overview . Construction contracts (IFRS vs. ASPE): ASPE: Percentage-of-completion and complete-contract methods allowed for long-term. The percentage of completion method is used when: Collections are assured; The accounting system can: Estimate profitability; Measure progress toward completion. IFRS: IFRS only mentions the percentage-of-completion method; however, it does not prevent recognition of revenue at the end of the contract if that is appropriate. If the outcome were not determinable the accounting would default to the completed contract method. ; Prior to the completion of the project, this method provides no useful information to the users of the financial statements of the company. Companies that use the CCM must have some sort of accounts to hold these transactions until recognition. SOP 81-1 requires that the percentage of completion method be used in lieu of the completed contract method when the following four items are present: Harmonizing to the article of Overview of the Completed Contract method and the Percentage of completion method, the writer identifies the appropriate state of affairss that will promote the choice of one method over the other. However, it is relevant if the percentage-of-completion method is used instead of the completed-contract method. The company will continue to use the completed-contract method for tax purposes. 2020-01-09 For short-term contracts, the taxpayer will use either the cash or accrual accounting method, but for certain long-term contracts, there are additional choices provided by IRC §460..

Percentage-of-Completion Method. The yield in this method is the same as that of the percentage completion method, but in the completed contract method yield will be considered only after the completion of the project. Percentage of completion does not recognize revenue \when payment is received for the total completion of long-term contracts, but over the term of work on the project.

Using the CCM, a contracting company doesn’t recognize either revenue or expense transactions relating to the contract until the contract is completely finished. Percentage-of-Completion Accounting Method – Entries and Construction Contracts Most business management experts agree that you can only improve what you can measure, and that the process of (accurate) measurement in and of itself almost always brings about change and improvement.

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