About this Course

1) To provide a clear understanding on the underlying principles and rationale for the revenue recognition principles in FRS 11; and

2) To equip participants with the ability to apply the special revenue and cost allocation and recognition, measurement and disclosure requirements in FRS 11 to construction contracts. 

To ensure that participants are able to:

• Understand the principles underlying the method of revenue recognition and reporting for construction contracts under FRS 11
  
• Identify a construction contract
  
• Analyze the conditions that will require combining or segmenting of construction contracts
  
• Apply the percentage of completion method to determine contract revenue and contract expenses
  
• Determine the outstanding balances in accordance with the requirements of FRS 11
  
• Differentiate accounting for expected losses from accounting for profitable contracts
  
• Identify the critical assumptions and sources of estimate uncertainty that lead to the change in estimate
  
• Apply the cost recovery method appropriately
  
• Present the appropriate disclosures to facilitate an understanding of the recognized amounts
  

Programme Outline 

• Objective and scope of FRS 11
  
• Definitions
  
• Identifying construction contracts 
  

              - Combining

              - Segmenting

              - Significance of fixed-price and cost-plus contracts

• Determining contract revenue
  

              - Identifying what contract revenue comprises of

              - Impact of variation orders and escalation clauses

              - Other arrangements that may affect the determination of contract revenue

              - Principles governing the determination of contract revenue

• Determining contract costs
  

              - Identifying what contract costs comprises of

              - Specific contract costs

              - Costs attributable to contract activity

              - Distinguishing between costs that are included in construction contracts and those that are expensed off

              - Pre-contract costs

              - Other special issues

              - Principles governing recognition as an asset and expensing of costs

• Recognition of contract revenue and contract costs
  

              - Percentage of completion or the stage of completion method

• Conditions for the use of the method and critical estimates and assumptions
  
• Bases to determine the percentage of completion
  
• Allocation of contract revenue and contract costs
  
• Accounting for progress billings
  
• Accounting for the construction work-in-progress
  
• Principles governing the allocation of contract revenue and contract costs
  

              - Recognition in different profit situations

• Outcome can be reliably measured
  
• Outcome cannot be reliably measured
  
• Expected loss
  
• Accounting for changes in estimates and changes in profit assumptions
  
• Presentation and disclosures 
  

              - Disclosures required by FRS 11

Intended For

A Foundation to Intermediate Level programme intended for Practising and Non-Practising Accountants who need to have an understanding of the accounting for construction contracts.

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