Summary 
Developments, Key Differences & History 
Compared to IFRS 
Interpretations 
Rejection Notices 
Questions & Answers 
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AASB website 

• Include construction contract, cost plus contract and fixed price contract.
• Construction contracts include:
  • Contracts for the rendering of services which are directly related to the construction of the asset.
   
  
  • Contracts for the destruction or restoration of assets, and the restoration of the environment following demolition of assets.
• Construction contracts can be fixed price contracts or cost plus contracts, or a combination of both.

• When a contract covers a number of assets, the construction of each asset is treated separately when:
  • Separate proposals have been submitted for each asset
   
  
  • Each asset has been subject to separate negotiation, and
   
  
  • The costs and revenues of each asset can be identified.
• A group of contracts, whether with a single customer or several, is treated as a single contract when:
  • The group of contracts is negotiated as a single package
   
  
  • The contracts are so closely related that they are part of a single project with an overall profit margin, and
   
  
  • The contracts are performed concurrently or in a continuous sequence.
• A contract may provide for the construction of an additional asset at the option of the customer, or may be amended to include the construction of an additional asset. The construction of the additional asset is treated as a separate contract when:
  • The asset is significantly different in design, technology or function from the asset/s covered by the original contract.
   
  
  • The price of the asset is negotiated without regard to the original contract price.

• When the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognised as revenue and expenses by reference to the stage of completion of the contract activity at reporting date.
 

• For a fixed price contract, the outcome can be estimated reliably when all the following are met:
  • Total contract revenue can be measured reliably.
   
  
  • It is probable that economic benefits associated with the contract will flow to the entity.
   
  
  • Both the contract costs to complete the contract and the stage of contract completion at reporting date can be measured reliably.
   
  
  • The contract costs attributable to the contract can be clearly identified and measured reliably so that actual costs incurred can be compared with prior estimates.
• For a cost plus contract, the outcome can be estimated reliably when all the following are met:
  • It is probable that economic benefits associated with the contract will flow to the entity.
   
  
  • The contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and measured reliably.
• Where the outcome of a construction contract cannot be estimated reliably, contract revenue must be recognised only to the extent that the costs incurred will be recoverable and contract costs must be recognised as expenses immediately.
 

• The excess of total contract costs over total contract revenue must be recognised as an expense immediately where it is probable that total contract costs will exceed total contract revenue.

• Amounts of contract revenue recognised as revenue during the period and methods used to determine this.
 

• Methods used to determine the stage of completion of contracts in progress.
 

• For contracts in progress during the period, the aggregate amount of costs incurred and recognised profits to date, the amount of advances received and the amount of retentions.
 

• Presentation of the gross amount due from customers for contract work as an asset and the gross amount due to customers for contract work as a liability.