Understanding Australian Accounting Standards 3E - Loftus - SMch30_sm_loftus

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1、SolutionsManualtoaccompanyUnderstandingAustralianAccountingStandardsbyJaniceLoftus,KenLeo,RuthPicker,VictoriaWiseandKerryClarkByJohnSweetingUpdatelogoJohnWiley&SonsAustralia,Ltd©JohnWileyandSonsAustralia,Ltd201230.37Chapter30:ConstructionContractsChapter30–Cons

2、tructionContractsDISCUSSIONQUESTIONSDISCUSSIONQUESTIONS1.WhataretherequirementsofAASB111ConstructionContractsregardingtherecognitionofrevenueandexpensesarisingfromaconstructioncontract?Paragraph11ofAASB111statesthattherevenuearisingfromaconstructioncontractcomp

3、rises:•theinitialamountdeterminedinaccordancewiththecontract•amountsarisingfromvariations,claimsandincentivepayments.Contractrevenueistobemeasuredasthefairvalueoftheconsiderationreceivedorreceivablebythecontractor.Paragraph16ofAASB111identifiesthreetypesofcosts

4、arisingfromaconstructioncontract:(a)coststhatrelatedirectlytothespecificcontract;(b)coststhatareattributabletocontractactivityingeneralandcanbeallocatedtothecontract;and(c)suchothercostsasarespecificallychargeabletothecustomerunderthetermsofthecontract.Contract

5、costsincurredduringthereportingperiodandwhicharedirectlyattributabletoaspecificconstructioncontractareusuallycapitalised(i.e.debited)toanaccounttermed‘contractworkinprogress’.TheapproachadoptedinAASB111istorecognisecontractrevenue,expensesandprofitperiodicallyo

6、verthelifeoftheconstructioncontract.Paragraph22ofAASB111states:Whentheoutcomeofaconstructioncontractcanbeestimatedreliably,contractrevenueandcontractcostsassociatedwiththeconstructioncontractshallberecognisedasrevenueandexpensesrespectivelybyreferencetothestage

7、ofcompletionofthecontractactivityattheendofthereportingperiod.Anexpectedlossontheconstructioncontractshallberecognisedasanexpenseimmediatelyinaccordancewithparagraph36.Therefore,AASB111recommendsthepercentageofcompletionmethod(orstageofcompletionmethod),provide

8、dcertainconditionsthatenabletheoutcomeofthecontracttobereliablyestimatedaresatisfied(seesection30.6).Thismethodallowsrecognitionofconstructionrevenue,expensesandprofitonacon