BV2010_IAS11_PART A
090311 Experience List SAS + GmbH 09March11
836308-01/02 836309-01 834741.01 634416.01
Eng. Contractor AXENS ERAS ERAS
Country (Contractor) France France France France France France France France France France France Fea Korea France France France France France France France France Germany Germany Germany
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AIR LIQUIDE ENG. 2008 PINETTE EMIDECAU INDUSTRIES 2008 2008 2008 2009 2009 2009 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 KERNEOS KERNEOS KERNEOS CAMOM - EFFAGE SANOFI AVENTIS FRANCEL FOSTER WHEELER FOSTER WHEELER JSPM - AREVA SOLVAY DOOSAN MECATECH DOOSAN MECATECH ALTAL (Air Liquide) TOTAL RAFFINAGE PILLARD PILLARD PILLARD
国际会计准则IAS_10英文版
IAS 10 International Accounting Standard 10Events after the Reporting PeriodThis version includes amendments resulting from IFRSs issued up to 17 January 2008.IAS 10 Events After the Ba la nce Sheet Da te was issued by the International Accounting Standards Committee in May 1999. It replaced those parts of IAS 10 Contingencies and Events Occurring After the Balance Sheet Date (originally issued June 1978, reformatted 1994) that were not replaced by IAS 37 (issued September 1998).In April 2001 the International Accounting Standards Board (IASB) resolved that all Standards and Interpretations issued under previous Constitutions continued to be applicable unless and until they were amended or withdrawn.In December 2003 the IASB issued a revised IAS 10 with a modified title—Events after the Balance Sheet Date.IAS 10 was amended by the following IFRSs:•IFRS5Non-Current Assets Held for Sale and Discontinued Operations (issued March 2004).•IAS1Presentation of Financial Statements (revised September 2007)As a result of the changes in terminology made by IAS 1 in 2007, the title of IAS 10 was changed to Events after the Reporting Period.The following Interpretation refers to IAS 10:•SIC-7 Introduction of the Euro (issued May 1998 and subsequently amended).© IASCF1035IAS 101036© IASCF C ONTENTSparagraphs INTRODUCTIONIN1–IN4INTERNATIONAL ACCOUNTING STANDARD 10EVENTS AFTER THE REPORTING PERIODOBJECTIVE1SCOPE2DEFINITIONS3–7RECOGNITION AND MEASUREMENT8–13Adjusting events after the reporting period8–9Non-adjusting events after the reporting period10–11Dividends12–13GOING CONCERN14–16DISCLOSURE17–22Date of authorisation for issue17–18Updating disclosure about conditions at the end of the reporting period19–20Non-adjusting events after the reporting period21–22EFFECTIVE DATE23WITHDRAWAL OF IAS 10 (REVISED 1999)24APPENDIXAmendments to other pronouncementsAPPROVAL OF IAS 10 BY THE BOARDBASIS FOR CONCLUSIONSIAS 10 International Accounting Standard 10 Events after the Reporting Period (IAS 10) is set out in paragraphs 1–24 and the Appendix. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 10 should be read in the context of its objective and the Basis for Conclusions, the Prefa ce to Interna tiona l Fina ncia l Reporting Sta nda rds and the Fra mework for the Prepa ra tion a nd Presentation of Financial Statements. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.© IASCF1037IAS 10IntroductionIN1International Accounting Standard 10 Events a fter the Reporting Period (IAS 10)* replaces IAS 10 Events After the Balance Sheet Date (revised in 1999) and should be applied for annual periods beginning on or after 1 January 2005. Earlier application is encouraged.Reasons for revising IAS 10IN2The International Accounting Standards Board developed this revised IAS 10 as part of its project on Improvements to International Accounting Standards.The project was undertaken in the light of queries and criticisms raised in relation to the Standards by securities regulators, professional accountants and other interested parties. The objectives of the project were to reduce or eliminate alternatives, redundancies and conflicts within the Standards, to deal with some convergence issues and to make other improvements.IN3For IAS 10 the Board’s main objective was a limited clarification of the accounting for dividends declared after the reporting period. The Board did not reconsider the fundamental approach to the accounting for events after the reporting period contained in IAS 10.The main changesIN4The main change from the previous version of IAS 10 was a limited clarification of paragraphs 12 and 13 (paragraphs 11 and 12 of the previous version of IAS 10).As revised, those paragraphs state that if an entity declares dividends after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period.*In September 2007 the IASB amended the title of IAS 10 from Events after the Balance Sheet Date to Events a fter the Reporting Period as a consequence of the revision of IAS 1 Presenta tion of Fina ncia l Statements in 2007.1038© IASCFIAS 10 International Accounting Standard 10Events after the Reporting PeriodObjective1The objective of this Standard is to prescribe:(a)when an entity should adjust its financial statements for events after thereporting period; and(b)the disclosures that an entity should give about the date when thefinancial statements were authorised for issue and about events after thereporting period.The Standard also requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate.Scope2This Standard shall be applied in the accounting for, and disclosure of, events after the reporting period.Definitions3The following terms are used in this Standard with the meanings specified:Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified:(a)those that provide evidence of conditions that existed at the end of thereporting period (adjusting events after the reporting period); and(b)those that are indicative of conditions that arose after the reporting period(non-adjusting events after the reporting period).4The process involved in authorising the financial statements for issue will vary depending upon the management structure, statutory requirements and procedures followed in preparing and finalising the financial statements.© IASCF1039IAS 105In some cases, an entity is required to submit its financial statements to its shareholders for approval after the financial statements have been issued. In such cases, the financial statements are authorised for issue on the date of issue, not the date when shareholders approve the financial statements.ExampleThe management of an entity completes draft financial statements for the yearto 31 December 20X1 on 28 February 20X2. On 18 March 20X2, the board ofdirectors reviews the financial statements and authorises them for issue.The entity announces its profit and selected other financial information on19March 20X2. The financial statements are made available to shareholdersand others on 1 April 20X2. The shareholders approve the financial statementsat their annual meeting on 15 May 20X2 and the approved financial statementsare then filed with a regulatory body on 17 May 20X2.The financial statements are authorised for issue on 18 March 20X2 (date of boardauthorisation for issue).6In some cases, the management of an entity is required to issue its financial statements to a supervisory board (made up solely of non-executives) for approval.In such cases, the financial statements are authorised for issue when the management authorises them for issue to the supervisory board.ExampleOn 18 March 20X2, the management of an entity authorises financialstatements for issue to its supervisory board. The supervisory board is made upsolely of non-executives and may include representatives of employees andother outside interests. The supervisory board approves the financialstatements on 26 March 20X2. The financial statements are made available toshareholders and others on 1 April 20X2. The shareholders approve thefinancial statements at their annual meeting on 15 May 20X2 and the financialstatements are then filed with a regulatory body on 17 May 20X2.The financial statements are authorised for issue on 18 March 20X2 (date of managementauthorisation for issue to the supervisory board).7Events after the reporting period include all events up to the date when the financial statements are authorised for issue, even if those events occur after the public announcement of profit or of other selected financial information.Recognition and measurementAdjusting events after the reporting period8An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period.1040© IASCFIAS 10 9The following are examples of adjusting events after the reporting period that require an entity to adjust the amounts recognised in its financial statements, or to recognise items that were not previously recognised:(a)the settlement after the reporting period of a court case that confirms thatthe entity had a present obligation at the end of the reporting period.The entity adjusts any previously recognised provision related to this courtcase in accordance with IAS 37 Provisions, Contingent Liabilities and ContingentAssets or recognises a new provision. The entity does not merely disclose acontingent liability because the settlement provides additional evidencethat would be considered in accordance with paragraph 16 of IAS 37.(b)the receipt of information after the reporting period indicating that anasset was impaired at the end of the reporting period, or that the amountof a previously recognised impairment loss for that asset needs to beadjusted. For example:(i)the bankruptcy of a customer that occurs after the reporting periodusually confirms that a loss existed at the end of the reporting periodon a trade receivable and that the entity needs to adjust the carryingamount of the trade receivable; and(ii)the sale of inventories after the reporting period may give evidence about their net realisable value at the end of the reporting period.(c)the determination after the reporting period of the cost of assetspurchased, or the proceeds from assets sold, before the end of the reportingperiod.(d)the determination after the reporting period of the amount ofprofit-sharing or bonus payments, if the entity had a present legal orconstructive obligation at the end of the reporting period to make suchpayments as a result of events before that date (see IAS 19 Employee Benefits).(e)the discovery of fraud or errors that show that the financial statements areincorrect.Non-adjusting events after the reporting period10An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period.11An example of a non-adjusting event after the reporting period is a decline in market value of investments between the end of the reporting period and the date when the financial statements are authorised for issue. The decline in market value does not normally relate to the condition of the investments at the end of the reporting period, but reflects circumstances that have arisen subsequently.Therefore, an entity does not adjust the amounts recognised in its financial statements for the investments. Similarly, the entity does not update the amounts disclosed for the investments as at the end of the reporting period, although it may need to give additional disclosure under paragraph 21.© IASCF1041IAS 10Dividends12If an entity declares dividends to holders of equity instruments (as defined in IAS32 Financial Instruments: Presentation) after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period.13If dividends are declared (ie the dividends are appropriately authorised and no longer at the discretion of the entity) after the reporting period but before the financial statements are authorised for issue, the dividends are not recognised asa liability at the end of the reporting period because they do not meet the criteriaof a present obligation in IAS 37. Such dividends are disclosed in the notes in accordance with IAS 1 Presentation of Financial Statements.Going concern14An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so.15Deterioration in operating results and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate. If the going concern assumption is no longer appropriate, the effect is so pervasive that this Standard requires a fundamental change in the basis of accounting, rather than an adjustment to the amounts recognised within the original basis of accounting.16IAS 1 specifies required disclosures if:(a)the financial statements are not prepared on a going concern basis; or(b)management is aware of material uncertainties related to events orconditions that may cast significant doubt upon the entity’s ability tocontinue as a going concern. The events or conditions requiring disclosuremay arise after the reporting period.DisclosureDate of authorisation for issue17An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact.18It is important for users to know when the financial statements were authorised for issue, because the financial statements do not reflect events after this date. 1042© IASCFIAS 10 Updating disclosure about conditions at the end of thereporting period19If an entity receives information after the reporting period about conditions that existed at the end of the reporting period, it shall update disclosures that relate to those conditions, in the light of the new information.20In some cases, an entity needs to update the disclosures in its financial statements to reflect information received after the reporting period, even when the information does not affect the amounts that it recognises in its financial statements. One example of the need to update disclosures is when evidence becomes available after the reporting period about a contingent liability that existed at the end of the reporting period. In addition to considering whether it should recognise or change a provision under IAS 37, an entity updates its disclosures about the contingent liability in the light of that evidence.Non-adjusting events after the reporting period21If non-adjusting events after the reporting period are material, non-disclosure could influence the economic decisions that users mak e on the basis of the financial statements. Accordingly, an entity shall disclose the following for each material category of non-adjusting event after the reporting period:(a)the nature of the event; and(b)an estimate of its financial effect, or a statement that such an estimatecannot be made.22The following are examples of non-adjusting events after the reporting period that would generally result in disclosure:(a) a major business combination after the reporting period (IFRS 3 BusinessCombinations requires specific disclosures in such cases) or disposing of amajor subsidiary;(b)announcing a plan to discontinue an operation;(c)major purchases of assets, classification of assets as held for sale inaccordance with IFRS 5 Non-current Assets Held for Sa le a nd DiscontinuedOperations, other disposals of assets, or expropriation of major assets bygovernment;(d)the destruction of a major production plant by a fire after the reportingperiod;(e)announcing, or commencing the implementation of, a major restructuring(see IAS 37);(f)major ordinary share transactions and potential ordinary sharetransactions after the reporting period (IAS 33 Earnings per Share requires anentity to disclose a description of such transactions, other than when suchtransactions involve capitalisation or bonus issues, share splits or reverseshare splits all of which are required to be adjusted under IAS 33);© IASCF1043IAS 10(g)abnormally large changes after the reporting period in asset prices orforeign exchange rates;(h)changes in tax rates or tax laws enacted or announced after the reportingperiod that have a significant effect on current and deferred tax assets andliabilities (see IAS 12 Income Taxes);(i)entering into significant commitments or contingent liabilities, forexample, by issuing significant guarantees; and(j)commencing major litigation arising solely out of events that occurred after the reporting period.Effective date23An entity shall apply this Standard for annual periods beginning on or after 1January 2005. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2005, it shall disclose that fact.Withdrawal of IAS 10 (revised 1999)24This Standard supersedes IAS 10 Events After the Balance Sheet Date (revised in 1999). 1044© IASCFIAS 10 AppendixAmendments to other pronouncementsThe a mendments in this a ppendix sha ll be a pplied for a nnua l periods beginning on or a fter 1Janua ry2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period.* * * * *The a mendments conta ined in this a ppendix when this Sta nda rd wa s revised in 2003 ha ve been incorporated into the relevant IFRSs published in this volume.© IASCF1045IAS 10Approval of IAS 10 by the BoardInternational Accounting Standard 10 Events after the Balance Sheet Date was approved for issue by the fourteen members of the International Accounting Standards Board.Sir David Tweedie ChairmanThomas E Jones Vice-ChairmanMary E BarthHans-Georg BrunsAnthony T CopeRobert P GarnettGilbert GélardJames J LeisenringWarren J McGregorPatricia L O’MalleyHarry K SchmidJohn T SmithGeoffrey WhittingtonTatsumi Yamada1046© IASCFIAS 10 BC Basis for Conclusions onIAS 10 Events after the Reporting Period*This Basis for Conclusions accompanies, but is not part of, IAS 10.IntroductionBC1This Basis for Conclusions summarises the International Accounting Standards Board’s considerations in reaching its conclusions on revising IAS 10 Events After the Balance Sheet Date in 2003. Individual Board members gave greater weight to some factors than to others.BC2In July 2001 the Board announced that, as part of its initial agenda of technical projects, it would undertake a project to improve a number of Standards, including IAS 10. The project was undertaken in the light of queries and criticisms raised in relation to the Standards by securities regulators, professional accountants and other interested parties. The objectives of the Improvements project were to reduce or eliminate alternatives, redundancies and conflicts within Standards, to deal with some convergence issues and to make other improvements. In May 2002 the Board published its proposals in an Exposure Draft of Improvements to International Accounting Standards, with a comment deadline of 16 September 2002. The Board received over 160 comment letters on the Exposure Draft.BC3Because the Board’s intention was not to reconsider the fundamental approach to the accounting for events after the balance sheet date established by IAS 10, this Basis for Conclusions does not discuss requirements in IAS 10 that the Board has not reconsidered.Limited clarificationBC4For this limited clarification of IAS 10 the main change made is in paragraphs 12 and 13 (paragraphs 11 and 12 of the previous version of IAS 10). As revised, those paragraphs state that if dividends are declared after the balance sheet date,† an entity shall not recognise those dividends as a liability at the balance sheet date.This is because undeclared dividends do not meet the criteria of a present obligation in IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The Board discussed whether or not an entity’s past practice of paying dividends could be considered a constructive obligation. The Board concluded that such practices do not give rise to a liability to pay dividends.*In September 2007 the IASB amended the title of IAS 10 from Events after the Balance Sheet Date to Events after the Reporting Period as a consequence of the amendments in IAS 1 Presentation of Financial Statements (as revised in 2007).†IAS1Presentation of Financial Statements (as revised in 2007) replaced the term ‘balance sheet date’with ‘end of the reporting period’.© IASCF1047。
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IAS 11 - CONSTRUCTION CONTRACT建筑包工合同
Objectives! To describe and explain the accounting treatment for construction contracts.CONSTRUCTIONCONTRACTSRECOGNTIONANDMEASUREMENTPRESENTATIONANDDISCLOSURE1 CONSTRUCTIONCONTRACTS1.1 Definitions! A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent interms of their design, technology and function or their ultimate purpose or use! A fixed price contract is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output, which in some cases is subjectto cost escalation clauses! A cost plus contract is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee.! Construction contracts include:# Contracts for the rendering of services which are directly related to theconstruction of the asset, for example, those for the services of projectmanagers and architects; and# Contracts for the destruction or restoration of assets, and the restoration ofthe environment following the demolition of assets.Contrast with speculative building work without a firm sale contract.This is work-in-progress and is valued at the lowert of cost and net realisable value.issue1.2 KeyRevenue and profit recognition! Contracts may last several years. Costs are incurred, and customer is billed, over duration of contract.! Potential treatments# Recognise all revenue and related costs in IS only on completion of contract, or;# Recognise revenue and costs in IS as contract progresses.! Accruals and prudence# Should recognise revenues and costs as they are earned and incurred.# Should only recognise profits when cash realisation is reasonably certain, but make provision for costs and losses when foreseen.# Prudence may conflict with accruals.! IAS 11 requires that the costs and revenues associated with a contract should be recognised in the income statement as the contract activity progresses.1.3 Revenue! Contract revenue should comprise:# The initial amount of revenue agreed in the contract; and# Variations in contract work, claims and incentive payments− to the extent that it is probable that they will result inrevenue; and− they are capable of being reliably measured! Contract revenue is measured at the fair value of the consideration received or receivable.! Its measurement is affected by a variety of uncertainties that depend on the outcome of future events. The estimates often need to be revised as events occur and uncertainties areresolved. Therefore, the amount of contract revenue may increase or decrease from oneperiod to the next. For example:# A contractor and a customer may agree variations or claims that increase ordecrease contract revenue in a period subsequent to that in which the contract wasinitially agreed;# The amount of revenue agreed in a fixed price contract may increase as a result of cost escalation clauses;# The amount of contract revenue may decrease as a result of penalties arising from delays caused by the contractor in the completion of the contract; or# When a fixed price contract involves a fixed price per unit of output,contract revenue increases as the number of units is increased.1.4 Contractcosts! Contract costs comprise:# Costs that relate directly to the specific contract;# Costs that are attributable to contract activity in general and can be allocated to the contract; and# Such other costs as are specifically chargeable to the customer under the terms of the contract.! Costs that relate directly to a specific contract include:# Site labour costs, including site supervision;# Costs of materials used in construction;# Depreciation of plant and equipment used on the contract;# Costs of moving plant, equipment and materials to and from the contract site;# Costs of hiring plant and equipment;# Costs of design and technical assistance that is directly related to the contract;# The estimated costs of rectification and guarantee work, including expected warranty costs; and# Claims from third parties.! These costs may be reduced by any incidental income that is not included in contract revenue, for example income from the sale of surplus materials and the disposal ofplant and equipment at the end of the contract.2 RECOGNITION AND MEASUREMENTrules2.1 The2.1.1 General! Contracts should be considered on a contract by contract basis.! The impact that a contract will have on the financial statements depends on the estimate of the future outcome of the contract.! The rules in IAS 11 provide for three possibilities.# Contracts which are expected to make a profit and where the outcome isreasonably certain.# Contracts where a loss is expected# Contracts where the outcome cannot be assessed with reasonable certainty. 2.1.2 Specific! When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract should be recognised asrevenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date. (Profit will be taken)! When it is probable that total contract costs will exceed total contract revenue, the expected loss should be recognised as an expense immediately.! When the outcome of a construction contract cannot be estimated reliably:# Revenue should be recognised only to the extent of contract costs incurred that it is probable will be recoverable; and# Contract costs should be recognised as an expense in the period in whichthey are incurred.2.1.3 CommentarySituation How is revenuemeasured?How are costsmeasured forrecognition in theincome statement?CommentsProfit is being taken By reference to thestage of (percentage)completion method The costs incurred inreaching the stage ofcompletion are takento the incomestatement as cost ofsales.Often this isachieved by applyingthe percentagecompletion to thetotal costs that areexpected to occurover the life of thecontract.Revenue > coststherefore profit isrecognised.If the same% completion isapplied to revenueand costs then thiswill result in thatpercentage of thetotal estimated profitbeing recognisedLossmakingcontracts By reference to thestage of (percentage)completion methodAs a balancingfigure to interactwith the revenue thathas been recognisedand generate therequired loss.Loss may berecognised at anystage of a contract.Eg an enterprise mayhave signed acontract that itknows will make aloss. In such a casethe loss should berecognised when thecontract is signed.Contracts where the outcome is uncertain To equal the costfigureThe costs incurred inthe period should beexpensedRevenue = costsThe usual source ofuncertainty is thatthe contract is stillquite young. Eg itmay be deemedimprudent to takeprofit on a 10 yearcontract when it isonly 1 year old.! Contracts should be considered on a contract by contract basis.! The accounting should be performed so as to recognise revenue and costs that have arisen in the period. This is done by calculating the amounts in total that should be recognisedby the yeart end and then adjusting them for what has been recognised in earlier years.2.1.4 Meaning of “can be estimated reliably”! In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied:# total contract revenue can be measured reliably;# It is probable that the economic benefits associated with the contract will flow to the enterprise;# Both the contract costs to complete the contract and the stage of contract completion at the balance sheet date can be measured reliably; and# The contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates.! In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied:# It is probable that the economic benefits associated with the contract will flow to the enterprise; and# The contract costs attributable to the contract, whether or not specificallyreimbursable, can be clearly identified and measured reliably.2.1.5 Stage of completion! The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method.# Contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can beattributed to the proportion of work completed.# This method provides useful information on the extent of contract activity and performance during a period. The standard does not specify a single method forcalculating the percentage of completion. Methods include− the proportion that contract costs incurred for work performed to date bearto the estimated total contract costs;− surveys of work performed; or− completion of a physical proportion of the contract work.! An expected loss on the construction contract should be recognised as an expense immediately.! Note that ;# amounts billed are irrelevant in determining revenue to be taken to the income statement.# Costs incurred by the year end (and therefore appearing in the cost accounts) may be an irrelevant figure in determining cost of sales.2.2 Calculations2.2.1 Basics! Make all calculations on contract by contract basis. There is no netting-off of profits on, or assets relating to, one contract against losses or liabilities on another.! Steps to obtain figures for the income statement.(a) Calculate total expected profit$price XContractLess Costs to date (X)Estimated future costs (X)——X——(b) Calculate the stage of completionincludemethodsAcceptableSales basis Cost basisValue of work done to date Costs to dateTotal sales value Total costs(IAS 11does not specify a method).(c) Calculate revenue and costs for the year(i) Calculate attributable revenue and costs to date (using proportion above)(ii) deduct any revenue and costs taken in earlier IS.(iii) If cannot prudently recognise profit, include same amount in IS for both revenue and cost of sales to give a nil profit.Illustration 1Tanner Ltd – year ended 31 December 19X2$Costs to date 1,500Future expected costs 1,000Work certified to date 1,800Expected sales value 3,200Revenue taken in earlier years’ IS 1,200Cost taken in earlier years’ IS 950RequiredCalculate the figures to be taken to the income statement in respect of revenue and costs year ended 31 December 19X2 on both a sales and a costs basis.Solution(a) Calculate total expected profit$Sales 3,200 Less Costs to date (1,500)Expected costs (1,000)———700———(b) PecentagecompletionSales basis $ Costs basis $1,8003,200= .56251,5002,500= .6(c) Calculate revenue and costs for the yearTo date Prior To date Priorperiod $ period $ Revenue 3,200 × .5625 = 1,800 – 1200 = 600 3,200 × .6 = 1,920 – 1200 = 720Cost of sales 2,500 × .5625 = 1,406 – 950 (456) 2,500 × .6 = 1,500 – 950 (550)——— ——— Profit (as above) 144 170——— ———2.2.2 Acomplication! In the above example the costs have been measured using the same percentage as that used to calculate the revenue.! This assumes that both costs and revenues arise evenly over the life of the contract. This may not be the case. IAS 11 says that the costs that must be measured as those incurred inreaching the stage of completion of the contract.! For example a company may make a mistake during the contract. The costs to correct this mistake are called “rectification costs”. They must be written off to profit in the period inwhich they are incurred.Illustration 2Tanner Ltd – year ended 31 December 19X2$Costs to date (including a rectification cost of $50) 1,500Future expected costs 1,000Work certified to date 1,800Expected sales value 3,200Revenue taken in earlier years’ IS 1,200Cost taken in earlier years’ IS 950Percentage complete 60%RequiredCalculate the figures to be taken to the income statement in respect of revenue andcosts year ended 31 December 19X2 on both a sales and a costs basis.The total costs that are expected to arise over the life of the contract are $2,500.Thes are made up of two types of cost:$costs50RectificationOther costs (which arise over the life of the contract 2,450To date Prior period This period Revenue 60% × 3,200 = 1,800 1,800 1,200 600CostsRectification 50 - (50)Other costs 60% × 2,450 1,470 950 (520)302.3 Recognition!The basic double entry for each contract is quite straightforward#The double entry for the revenue to be recognised is:Dr ReceivableX Cr SalesXThis receivable is not like other receivables. It is an account that is set up so that revenue can be recognised. It is not there because an invoice has been raised. It is of the nature of a suspense account. It will be described as a notional receivable in the rest of this session#The double entry for the costs isDr Cost of salesX Cr Contract costXThis transfers costs that have been accumulated in the contract account to the income statement.Notional receivable Income statementCosts$ $ $ Balance b/fXCosts b/fXRevenue recognised in the periodX XCosts of sales(X)(X)ProfitX Balance c/fXCosts c/fX!If an invoice is raised in respect of the contract the double entry is:Dr Trade receivablesX Cr Notional receivableXThe credit for a trade receivable usually goes to sales. The above double entry prevents double counting the revenue from the contract and the amount of receivable recognised.!Amounts raised as invoices are known as billings or progress payments.Illustration 3Year ended 31 December 19X6$ Revenue to be recognised 1,250 Costs to date 1,080 Costs to be recognised 1,000 Billings 640Notional receivable Income statementCosts$ $ $Costs b/f 1,080Revenue recognised in the period 1,2501,250Cost of sales(1,000)(1,000)Billings (640)Profit250 Balance c/f 610Costs c/f80Notes:1. The debit entry for the billings may be in trade receivables or if the invoice has been paidit is in cash. 2. The balance on the notional receivable could well be negative (a credit balance). Thisdepends on the interaction between the amount invoiced and the amount recognised as revenue. 3. The balance on the contract cost account could well be negative (a credit balance). Itdepends on the level of costs recognised in the income statement. If the contract is a loss maker this often leads to the recognition of costs greater than those incurred.3 PRESENTATION AND DISCLOSURENote ! An enterprise should disclose:# The amount of contract revenue recognised as revenue in the period;# The methods used to determine the contract revenue recognised in theperiod; and# The methods used to determine the stage of completion of contracts inprogress.1! An enterprise should disclose each of the following for contracts in progress at the balance sheet date:# The aggregate amount of costs incurred and recognised profits (lessrecognised losses) to date;# The amount of advances received; and# The amount of retentions.2! An enterprise should present# The gross amount due from customers for contract work as an asset;and# The gross amount due to customers for contract work as a liability2! The standard says that the gross amount due to or from customers is the netamount of# Costs incurred plus recognised profits; less# The sum of recognised losses and progress billings! Note that it is also the sum of the balances on the notional receivable and contract costs accounts. 2 2! The note references are to the illustration on the next page.Illustration 4Using the figures from illustration 2$Contract revenue recognised as revenue in the period: 1,250 1Contract costs incurred and recognised profits ( less recognised losses ) to date W1 1,330 2Gross amounts due from customers for contract work W2 6902Working $Costs incurred 1,080Recognised profits 2501,330 W1Less billings (640)Amount due from customers (which is the same as the balance on the notionalreceivable account and the contract costs account $610+ 80) 690 W2FOCUSYou should now be able tos describe and demonstrate the accounting for construction contracts, applying theprinciples of IAS 11.s explain the application of the fundamental concepts of accruals and prudence toaccounting for construction contracts.。
Occupational Outlook Handbook 2010-11 Edition
1EngineersSignificant Points• Employment is projected to grow about as fast as the average for all occupations, although growth will vary by specialty; overall job opportunities for engi -neers are expected to be good.• A bachelor’s degree in engineering is required for most entry-level jobs, but some research positions may require a graduate degree.• Starting salaries are among the highest of all collegegraduates.• Continuing education is critical for engineers in orderto keep up with improvements in technology.Nature of the WorkEngineers apply the principles of science and mathematics to develop economical solutions to technical problems. Their work is the link between scientific discoveries and the commer -cial applications that meet societal and consumer needs.Many engineers develop new products. During the process, they consider several factors. For example, in developing an industrial robot, engineers specify the functional requirements precisely; design and test the robot’s components; integrate the components to produce the final design; and evaluate thed esign’s overall effectiveness, cost, reliability, and safety. This process applies to the development of many different products, such as chemicals, computers, powerplants, helicopters, and toys.In addition to their involvement in design and development, many engineers work in testing, production, or maintenance. These engineers supervise production in factories, determine the causes of a component’s failure, and test manufactured products to maintain quality. They also estimate the time and cost required to complete projects. Supervisory engineers are responsible for major components or entire projects. (See the statement on engineering and natural sciences managers else -where in the Handbook .)Engineers use computers extensively to produce and analyze designs; to simulate and test how a machine, structure, or sys -tem operates; to generate specifications for parts; to monitor the quality of products; and to control the efficiency of pro -cesses. Nanotechnology, which involves the creation of high-performance materials and components by integrating atoms and molecules, also is introducing entirely new principles to the design process.Most engineers specialize. Following are details on the 17 engineering specialties covered in the Federal Government’s Standard Occupational Classification (SOC) system. Numerous other specialties are recognized by professional societies, and each of the major branches of engineering has numerous subdi -visions. Civil engineering, for example, includes structural and transportation engineering, and materials engineering includes ceramic, metallurgical, and polymer engineering.EngineersEngineers design tests for new products.also may specialize in one industry, such as motor vehicles, or in one type of technology, such as turbines or semiconductor materials.Aerospace engineers design, test, and supervise the manufac -ture of aircraft, spacecraft, and missiles. Those who work with aircraft are called aeronautical engineers , and those working specifically with spacecraft are astronautical engineers . Aero -space engineers develop new technologies for use in aviation, defense systems, and space exploration, often specializing in areas such as structural design, guidance, navigation and con -trol, instrumentation and communication, and production meth -ods. They also may specialize in a particular type of aerospace product, such as commercial aircraft, military fighter jets, he -licopters, spacecraft, or missiles and rockets, and may become experts in aerodynamics, thermodynamics, celestial mechanics, propulsion, acoustics, or guidance and control systems.Agricultural engineers apply their knowledge of engineering technology and science to agriculture and the efficient use of biological resources. Accordingly, they also are referred to as biological and agricultural engineers . They design agricultural machinery, equipment, sensors, processes, and structures, such as those used for crop storage. Some engineers specialize in areas such as power systems and machinery design, structural and environmental engineering, and food and bioprocess en -gineering. They develop ways to conserve soil and water and to improve the processing of agricultural products. Agricultural engineers often work in research and development, production, sales, or management.Biomedical engineers develop devices and procedures that solve medical and health-related problems by combining their knowledge of biology and medicine with engineering principles and practices. Many do research, along with medical scientists, to develop and evaluate systems and products such as artifi -cial organs, prostheses (artificial devices that replace m issing body parts), instrumentation, medical information systems, and health management and care delivery systems. Biomedi -cal engineers also may design devices used in various medi -cal procedures, imaging systems such as magnetic resonanceimaging (MRI), and devices for automating insulin injections or controlling body functions. Most engineers in this specialty need a sound background in another engineering specialty, such as mechanical or electronics engineering, in addition to special-ized biomedical training. Some specialties within biomedical engineering are biomaterials, biomechanics, medical imaging, rehabilitation engineering, and orthopedic engineering. Chemical engineers apply the principles of chemistry to solve problems involving the production or use of chemicals and other products. They design equipment and processes for large-scale chemical manufacturing, plan and test methods of manufacturing products and treating byproducts, and supervise production. Chemical engineers also work in a variety of manu-facturing industries other than chemical manufacturing, such as those producing energy, electronics, food, clothing, and paper. In addition, they work in healthcare, biotechnology, and busi-ness services. Chemical engineers apply principles of physics,mathematics, and mechanical and electrical engineering, as well as chemistry. Some may specialize in a particular chemical process, such as oxidation or polymerization. Others specialize in a particular field, such as nanomaterials, or in the develop-ment of specific products. They must be aware of all aspects of chemical manufacturing and how the manufacturing process af-fects the environment and the safety of workers and consumers. Civil engineers design and supervise the construction of roads, buildings, airports, tunnels, dams, bridges, and water supply and sewage systems. They must consider many factors in the design process from the construction costs and expected lifetime of a project to government regulations and potential environmental hazards such as earthquakes and hurricanes. Civil engineering, considered one of the oldest engineering disciplines, encompasses many specialties. The major ones are structural, water resources, construction, transportation, and geotechnical engineering. Many civil engineers hold superviso-ry or administrative positions, from supervisor of a construction site to city engineer. Others may work in design, construction, research, and teaching.Computer hardware engineers research, design, develop, test, and oversee the manufacture and installation of computer hardware, including computer chips, circuit boards, computer systems, and related equipment such as keyboards, routers, and printers. (Computer software engineers—often simply called computer engineers—design and develop the software systems that control computers. These workers are covered elsewhere in the Handbook.) The work of computer hardware engineers is similar to that of electronics engineers in that they may d esign and test circuits and other electronic components; however, computer hardware engineers do that work only as it r elates to computers and computer-related equipment. The rap-id a dvances in computer technology are largely a result of the research, development, and design efforts of these engineers. Electrical engineers design, develop, test, and supervise the manufacture of electrical equipment. Some of this equipment includes electric motors; machinery controls, l ighting, and w iring in buildings; radar and navigation systems; communi-cations systems; and power generation, control, and transmis-sion devices used by electric utilities. Electrical engineers also design the electrical systems of automobiles and aircraft. Al-though the terms electrical and electronics engineering o ften are used interchangeably in academia and industry, electrical engineers traditionally have focused on the generation and s upply of power, whereas electronics engineers have worked on applications of electricity to control systems or signal pro-cessing. Electrical engineers specialize in areas such as power systems engineering or electrical equipment manufacturing. Electronics engineers, except computer, are responsible for a wide range of technologies, from portable music players to global positioning systems (GPS), which can continuously pro-vide the location of, for example, a vehicle. Electronics engi-neers design, develop, test, and supervise the manufacture of electronic equipment such as broadcast and communications systems. Many electronics engineers also work in areas closely related to computers. However, engineers whose work is re-lated exclusively to computer hardware are considered com-puter hardware engineers. Electronics engineers specialize in areas such as communications, signal processing, and control systems or have a specialty within one of these areas—control systems or aviation electronics, for example. Environmental engineers use the principles of biology and chemistry to develop solutions to environmental problems. They are involved in water and air pollution control, recycling, waste disposal, and public health issues. Environmental engineers conduct hazardous-waste management studies in which they evaluate the significance of the hazard, advise on its treatment and containment, and develop regulations to prevent mishaps. They design municipal water supply and industrial wastewater treatment systems, conduct research on the environmental im-pact of proposed construction projects, analyze scientific data, and perform quality-control checks. Environmental engineers are concerned with local and worldwide environmental issues. Some may study and attempt to minimize the effects of acid rain, global warming, automobile emissions, and ozone deple-tion. They also may be involved in the protection of wildlife. Many environmental engineers work as consultants, helping their clients to comply with regulations, prevent environmental damage, and clean up hazardous sites.Health and safety engineers, except mining safety engi-neers and inspectors, prevent harm to people and property by applying their knowledge of systems engineering and me-chanical, chemical, and human performance principles. Using Some engineers, like mining and civil engineers, work outside.2this specialized knowledge, they identify and measure poten-tial h azards, such as the risk of fires or the dangers involved in handling toxic chemicals. They recommend appropriate loss prevention measures according to their probability of harm and p otential damage. Health and safety engineers develop proce-dures and d esigns to reduce the risk of illness, injury, or damage. Some work in manufacturing industries to ensure that the de-signs of new products do not create unnecessary hazards. They must be able to anticipate, recognize, and e valuate h azardous conditions, as well as develop hazard control m ethods. Industrial engineers determine the most effective ways to use the basic factors of production—people, machines, m aterials, information, and energy—to make a product or pro-vide a s ervice. They are concerned primarily with increasing productivity through the management of people, methods of business organization, and technology. To maximize efficiency, industrial engineers study product requirements carefully and then design manufacturing and information systems to meet those requirements with the help of mathematical methods and models. They develop management control systems to aid in financial planning and cost analysis, and they design produc-tion planning and control systems to coordinate activities and ensure product quality. They also design or improve systems for the physical distribution of goods and services and determine the most efficient plant locations. Industrial engineers develop wage and s alary administration systems and job evaluation pro-grams. Many industrial engineers move into management posi-tions because the work is closely related to the work of manag-ers.Marine engineers and naval architects are involved in the de-sign, construction, and maintenance of ships, boats, and related equipment. They design and supervise the construction of ev-erything from aircraft carriers to submarines and from sailboats to tankers. Naval architects work on the basic design of ships, including the form and stability of hulls. Marine engineers work on the propulsion, steering, and other systems of ships. Marine engineers and naval architects apply knowledge from a range of fields to the entire process by which water vehicles are designed and produced. Other workers who operate or supervise the op-eration of marine machinery on ships and other vessels some-times may be called marine engineers or, more frequently, ship engineers, but they do different work and are covered under water transportation occupations elsewhere in the Handbook. Materials engineers are involved in the development, pro-cessing, and testing of the materials used to create a range of products, from computer chips and aircraft wings to golf clubs and snow skis. They work with metals, ceramics, plastics, semi-conductors, and composites to create new materials that meet certain mechanical, electrical, and chemical requirements. They also are involved in selecting materials for new applications. Materials engineers have developed the ability to create and then study materials at an atomic level, using advanced pro-cesses to replicate the characteristics of those materials and their components with computers. Most materials engineers specialize in a particular material. For example, metallurgical engineers specialize in metals such as steel, and ceramic engi-neers develop ceramic materials and the processes for making them into useful products such as glassware or fiber-optic com-munication lines.Mechanical engineers research, design, develop, manufac-ture, and test tools, engines, machines, and other mechani-cal devices. Mechanical engineering is one of the broadest engineering disciplines. Engineers in this discipline work on power-producing machines such as electric generators, inter-nal c ombustion engines, and steam and gas turbines. They also work on power-using machines such as refrigeration and air-conditioning equipment, machine tools, material-handling sys-tems, elevators and escalators, industrial production equipment, and robots used in manufacturing. Some mechanical engineers design tools that other engineers need for their work. In addi-tion, mechanical engineers work in manufacturing or agricul-ture production, maintenance, or technical sales; many become administrators or managers.Mining and geological engineers, including mining safety engineers, find, extract, and prepare coal, metals, and minerals for use by manufacturing industries and utilities. They d esign open-pit and underground mines, supervise the construction of mine shafts and tunnels in underground operations, and de-vise methods for transporting minerals to processing plants. M ining engineers are responsible for the safe, economical, and e nvironmentally sound operation of mines. Some mining engi-neers work with geologists and metallurgical engineers to lo-cate and appraise new ore deposits. Others develop new mining equipment or direct mineral-processing operations that separate minerals from the dirt, rock, and other materials with which they are mixed. Mining engineers frequently specialize in the mining of one mineral or metal, such as coal or gold. With in-creased emphasis on protecting the environment, many mining engineers are working to solve problems related to land recla-mation and to water and air pollution. Mining safety engineers use their knowledge of mine design and practices to ensure the safety of workers and to comply with State and Federal safety regulations. They inspect the surfaces of walls and roofs, moni-tor air quality, and examine mining equipment for compliance with safety practices.Nuclear engineers research and develop the processes, in-struments, and systems used to derive benefits from nuclear en-ergy and radiation. They design, develop, monitor, and operate nuclear plants to generate power. They may work on the nuclearfuel cycle—the production, handling, and use of nuclear fuel Engineers typically need a bachelor’s degree.34and the safe disposal of waste produced by the generation ofn uclear energy—or on the development of fusion energy. Some specialize in the development of nuclear power sources for na -val v essels or spacecraft; others find industrial and medical uses for r adioactive materials—for example, in equipment used tod iagnose and treat medical problems.Petroleum engineers design methods for extracting oil and gas from deposits below the earth. Once these resources have been discovered, petroleum engineers work with geologists and other specialists to understand the geologic formation and prop -erties of the rock containing the reservoir, to determine the drill -ing methods to be used, and to monitor drilling and production operations. They design equipment and processes to achieve the maximum profitable recovery of oil and gas. Because only a small proportion of oil and gas in a reservoir flows out under natural forces, petroleum engineers develop and use various enhanced recovery methods, including injecting water, chemi -cals, gases, or steam into an oil reservoir to force out more of the oil and doing computer-controlled drilling or fracturing to connect a larger area of a reservoir to a single well. Because even the best techniques in use today recover only a portion of the oil and gas in a reservoir, petroleum engineers research and develop technology and methods for increasing the recovery of these resources and lowering the cost of drilling and production operations.Work environment. Most engineers work in office build -ings, laboratories, or industrial plants. Others may spend time outdoors at construction sites and oil and gas exploration and production sites, where they monitor or direct operations or solve onsite problems. Some engineers travel extensively to plants or worksites here and abroad.Many engineers work a standard 40-hour week. At times, deadlines or design standards may bring extra pressure to a job, requiring engineers to work longer hours.Training, Other Qualifications, and AdvancementEngineers typically enter the occupation with a bachelor’sd egree in an engineering specialty, but some basic researchp ositions may require a graduate degree. Engineers offering their services directly to the public must be licensed. Continu -ing education to keep current with rapidly changing technologyis important for engineers.Education and training. A bachelor’s degree in engineering is required for almost all entry-level engineering jobs. C ollege graduates with a degree in a natural science or mathematicso ccasionally may qualify for some engineering jobs, espe -cially in specialties that are in high demand. Most engineering degrees are granted in electrical and electronics engineering, mechanical engineering, and civil engineering. However, engi -neers trained in one branch may work in related branches. For example, many aerospace engineers have training in m echanical engineering. This flexibility allows employers to meet s taffing needs in new technologies and specialties in which engineers may be in short supply. It also allows engineers to shift to fields with better employment prospects or to those which more closely match their interests.Most engineering programs involve a concentration of study in an engineering specialty, along with courses in both math -ematics and the physical and life sciences. Many programs also include courses in general engineering. A design course, some -times accompanied by a computer or laboratory class or both, is part of the curriculum of most programs. Often, general courses not directly related to engineering, such as those in the social sciences or humanities, also are required.In addition to the standard engineering degree, many colleges offer 2-year or 4-year degree programs in engineering technol -ogy. These programs, which usually include various hands-on laboratory classes that focus on current issues in the applica -tion of engineering principles, prepare students for practical design and production work, rather than for jobs that require more theoretical and scientific knowledge. Graduates of 4-year technology programs may get jobs similar to those obtained by graduates with a bachelor’s degree in engineering. Engineering technology graduates, however, are not qualified to register as professional engineers under the same terms as graduates with degrees in engineering. Some employers regard technology program graduates as having skills between those of a techni -cian and an engineer.Graduate training is essential for engineering faculty posi -tions and some research and development programs, but is not required for the majority of entry-level engineering jobs. Many experienced engineers obtain graduate degrees in engineering or business administration to learn new technology and broaden their education. Numerous high-level executives in government and industry began their careers as engineers.The Accreditation Board for Engineering and Technology (ABET) accredits college and university programs in engineer -ing and engineering technology. ABET accreditation is based on a program’s faculty, curriculum, and facilities; the achieve -ment of a program’s students; program improvements; and institutional commitment to specific principles of quality and ethics. Graduation from an ABET-accredited program may be required for engineers who need to be licensed.Although most institutions offer programs in the major branches of engineering, only a few offer programs in the smaller specialties. Also, programs with the same title may vary in content. For example, some programs emphasize industrial practices, preparing students for a job in industry, whereas oth-Job opportunities should be favorable for graduates of engi-neering programs.ers are more theoretical and are designed to prepare students for graduate work. Therefore, students should investigate curricula and check accreditations carefully before selecting a college. Admissions requirements for undergraduate engineering schools include a solid background in mathematics (algebra, geometry, trigonometry, and calculus) and science (biology, chemistry, and physics), in addition to courses in English, so-cial studies, and humanities. Bachelor’s degree programs in engineering typically are designed to last 4 years, but many stu-dents find that it takes between 4 and 5 years to complete their studies. In a typical 4-year college curriculum, the first 2 years are spent studying mathematics, basic sciences, introductory engineering, humanities, and social sciences. In the last 2 years, most courses are in engineering, usually with a concentration in one specialty. Some programs offer a general engineering curriculum; students then specialize on the job or in graduate school.Some engineering schools have agreements with 2-year col-leges whereby the college provides the initial engineering edu-cation and the engineering school automatically admits students for their last 2 years. In addition, a few engineering schools have arrangements that allow students who spend 3 years in a liberal arts college studying preengineering subjects and 2 years in an engineering school studying core subjects to receive a bachelor’s degree from each school. Some colleges and uni-versities offer 5-year master’s degree programs. Some 5-year or even 6-year cooperative plans combine classroom study with practical work, permitting students to gain valuable experience and to finance part of their education.Licensure. All 50 States and the District of Columbia require licensure for engineers who offer their services directly to the public. Engineers who are licensed are called professional en-gineers (PEs). This licensure generally requires a degree from an ABET-accredited engineering program, 4 years of relevant work experience, and completion of a State examination. Recent graduates can start the licensing process by t aking the exami-nation in two stages. The initial Fundamentals of E ngineering (FE) examination can be taken upon graduation. Engineers who pass this examination commonly are called engineers in train-ing (EITs) or engineer interns (EIs). After acquiring suitable work experience, EITs can take the second examination, called the Principles and Practice of Engineering exam. Several States have imposed mandatory continuing education requirements for relicensure. Most States recognize licensure from other States, provided that the manner in which the initial license was obtained meets or exceeds their own licensure requirements. Many civil, mechanical, and chemical engineers are licensed PEs. Independently of licensure, various certification programs are offered by professional organizations to demonstrate com-petency in specific fields of engineering.Other qualifications. Engineers should be creative, inquisi-tive, analytical, and detail oriented. They should be able to work as part of a team and to communicate well, both orally and in writing. Communication abilities are becoming increasingly important as engineers interact more frequently with specialists in a wide range of fields outside engineering.Engineers who work for the Federal Government usually must be U.S. citizens. Some engineers, particularly nuclear en-gineers and aerospace and other engineers working for defense contractors, may need to hold a security clearance. Certification and advancement. Beginning engineering graduates usually work under the supervision of experienced engineers and, in large companies, also may receive formal classroom or seminar-type training. As new engineers gain knowledge and experience, they are assigned more difficult projects with greater independence to develop designs, solve problems, and make decisions. Engineers may advance to be-come technical specialists or to supervise a staff or team of engi-neers and technicians. Some eventually may become engineer-ing managers or enter other managerial or sales jobs. In sales, an engineering background enables them to discuss a product’s technical aspects and assist in product planning, installation, and use. (See the statements under management and business and financial operations occupations, and the statement on sales engineers elsewhere in the Handbook.)Numerous professional certifications for engineers exist and may be beneficial for advancement to senior technical or mana-gerial positions. Many certification programs are offered by the professional societies listed as sources of additional informa-tion for engineering specialties at the end of this s tatement. EmploymentIn 2008, engineers held about 1.6 million jobs. Following is the distribution of employment by engineering specialty:Civil engineers............................................................278,400 Mechanical engineers .................................................238,700 Industrial engineers ....................................................214,800 Electrical engineers ....................................................157,800 Electronics engineers, except computer .....................143,700 Computer hardware engineers ......................................74,700 Aerospace engineers .....................................................71,600 Environmental engineers ..............................................54,300 Chemical engineers ......................................................31,700 Health and safety engineers, except mining safetyengineers and inspectors ...........................................25,700 Materials engineers ......................................................24,400 Petroleum engineers .....................................................21,900 Nuclear engineers .........................................................16,900 Biomedical engineers ...................................................16,000 Marine engineers and naval architects ...........................8,500 Mining and geological engineers, including miningsafety engineers ..........................................................7,100 Agricultural engineers ....................................................2,700All other engineers .....................................................183,200 About 36 percent of engineering jobs were found in manu-facturing industries, and another 30 percent were in the pro-fessional, scientific, and technical services industries, primarily in architectural, engineering, and related services. Many engi-neers also worked in the construction, telecommunications, and wholesale trade industries.Federal, State, and local governments employed about 12 per-cent of engineers in 2008. About 6 percent were in the F ederal Government, mainly in the U.S. Departments of D efense, Transportation, Agriculture, Interior, and Energy, and in the Na-tional Aeronautics and Space Administration. Many engineers in State and local government agencies worked in highway and5。
IFRS 9_PART B
IFRS 9 IASB documents published to accompanyInternational Financial Reporting Standard 9Financial InstrumentsThe text of the unaccompanied IFRS 9 is contained in Part A of this edition. Its effective date is 1 January 2013. This part presents the following accompanying documents:page APPROVAL BY THE BOARD OF IFRS 9 ISSUED IN NOVEMBER 2009B604 BASIS FOR CONCLUSIONS B605 APPENDIXAmendments to the Basis for Conclusions on other IFRSs B637 DISSENTING OPINIONS B638 AMENDMENTS TO GUIDANCE ON OTHER IFRSs B643© IASCF B603IFRS 9Approval by the Board of IFRS 9 issued in November 2009 International Financial Reporting Standard 9 Financial Instruments was approved for issue by thirteen of the fifteen members of the International Accounting Standards Board. Mr Leisenring and Ms McConnell dissented from the issue of the IFRS. Their dissenting opinions are set out after the Basis for Conclusions.Sir David Tweedie ChairmanStephen CooperPhilippe DanjouJan EngströmPatrick FinneganRobert P GarnettGilbert GélardAmaro Luiz de Oliveira GomesPrabhakar KalavacherlaJames J LeisenringPatricia McConnellWarren J McGregorJohn T SmithTatsumi YamadaWei-Guo ZhangB604© IASCFIFRS 9 BC © IASCF B605C ONTENTSparagraphs BASIS FOR CONCLUSIONS ON IFRS 9 FINANCIAL INSTRUMENTSINTRODUCTIONBC1–BC4SCOPEBC5–BC7CLASSIFICATIONBC8–BC74Measurement categoriesBC10–BC18Approach to classificationBC19–BC52Embedded derivativesBC53–BC60Option to designate a financial asset at fair valueBC61–BC64Reclassification between fair value and amortised cost categoriesBC65–BC74MEASUREMENTBC75–BC89Gains and lossesBC82–BC89EFFECTIVE DATEBC90–BC95TRANSITIONBC96–BC117Transition reliefBC100–BC109Transitional disclosuresBC110–BC111Transition for future phasesBC112Transitional insurance issuesBC113–BC117SUMMARY OF MAIN CHANGES FROM THE EXPOSURE DRAFTBC118COST-BENEFIT CONSIDERATIONSBC119–BC123APPENDIXAmendments to the Basis for Conclusions on other IFRSsDISSENTING OPINIONSIFRS 9 BCBasis for Conclusions onIFRS 9 Financial InstrumentsThis Basis for Conclusions accompanies, but is not part of, IFRS 9.IntroductionBC1This Basis for Conclusions summarises the International Accounting Standards Board’s considerations in developing IFRS 9 Financial Instruments. Individual Board members gave greater weight to some factors than to others.BC2The Board has long acknowledged the need to improve the requirements for financial reporting of financial instruments to make it easier for users of financial statements to understand financial reporting information. To meet the heightened urgency of that need in the light of the financial crisis, the Board proposes to replace IAS 39 Financial Instruments: Recognition and Measurement by the end of 2010. To make progress as quickly as possible the Board has divided the project into several phases. In adopting this approach, the Board acknowledged the difficulties that might be created by differences in timing between this project and others, in particular phase II of the project on insurance contracts.(Paragraphs BC91(b), BC93 and BC113–BC117 discuss issues relating to insurance contracts.)BC3IFRS 9 is a new standard dealing with the accounting for financial instruments.In developing IFRS 9, the Board considered the responses to its exposure draft Financial Instruments: Cl assification and Measurement, published in July 2009. As a result, in November 2009 the Board finalised the first part of IFRS 9, dealing with classification and measurement of financial assets. In the Board’s view, requirements on classification and measurement are the foundation for any financial reporting standard, and requirements on associated matters (for example, on impairment and hedge accounting) have to reflect those requirements. In addition, the Board noted that many of the application issues that have arisen in the financial crisis are related to the classification and measurement of financial assets in accordance with IAS 39.BC4The Board sees this first phase of the project to replace IAS 39 as a stepping stone to future improvements in the financial reporting of financial instruments and is committed to completing its project on financial instruments expeditiously.The Board is also committed to the convergence of IFRSs and US GAAP requirements for financial instruments. There are many detailed differences between them, making it impossible to achieve convergence on the basis of existing requirements. The Board will consider publishing for comment any proposals that the US Financial Accounting Standards Board (FASB) may publish, to the extent that they are different from IFRSs or proposed IFRSs.ScopeBC5The Board has not yet considered the scope of IFRS 9. The scope of IAS 39 and its interaction with other IFRSs have resulted in some application and interpretation issues. However, the Board believes that it should address the issue of scope comprehensively rather than only in the context of classification and B606© IASCFIFRS 9 BC measurement. The scope of IAS 39 has not been raised as a matter of concern during the financial crisis and, hence, the Board believes that the scope of IFRS 9 should be based on that of IAS 39 until it considers the scope more generally in a later phase of the project to replace IAS 39.BC6The exposure draft contained proposals for all items within the scope of IAS 39.However, some respondents to the exposure draft said that the Board should restrict its proposals on classification and measurement to financial assets and retain the existing requirements for financial liabilities (including the requirements for embedded derivatives and the fair value option) until the Board has more fully considered and debated the issues relating to financial liabilities.Those respondents pointed out that the Board accelerated its project on financial instruments because of the global financial crisis, which placed more emphasis on issues in the accounting for financial assets than for financial liabilities. They suggested that the Board should consider issues that arise from its projects on own credit risk and other related projects more fully before finalising the requirements for classification and measurement of financial liabilities.BC7The Board noted those concerns and decided that IFRS 9 should at this stage apply only to assets within the scope of IAS 39. Thus, financial liabilities, including derivative liabilities, remain within the scope of IAS 39. Accordingly, this Basis for Conclusions discusses the responses to the exposure draft as they apply to the classification and measurement of financial assets. Taking this course will enable the Board to obtain further feedback on the accounting for financial liabilities, including how best to address accounting for changes in own credit risk. ClassificationBC8In IFRS 9 the Board aimed to improve the ability of users to understand the financial reporting of financial assets by:(a)reducing the number of classification categories and providing a clearerrationale for measuring financial assets in a particular way that replacesthe numerous categories in IAS 39, each of which has specific rulesdictating how an asset can or must be classified;(b)applying a single impairment method to all financial assets not measuredat fair value, which replaces the many different impairment methods thatare associated with the numerous classification categories in IAS 39; and(c)aligning the measurement attribute of financial assets to the way theentity manages its financial assets (‘business model’) and their contractualcash flow characteristics, thus providing relevant and useful informationto users for their assessment of the amounts, timing and uncertainty of theentity’s future cash flows.BC9The Board believes that IFRS 9 both improves the ability of users to understand and use the financial reporting of financial assets and eliminates much of the complexity in IAS 39. The Board disagrees with the assertion made by a dissenting Board member that IFRS 9 does not meet the objective of reducing the number of classification categories for financial assets and eliminating the specific rules associated with those categories. Unlike IAS 39, IFRS 9 provides a clear rationale for© IASCF B607IFRS 9 BCmeasuring a financial asset at either amortised cost or fair value, and hence improves the ability of users to understand the financial reporting of financial assets. IFRS 9 aligns the measurement attribute of financial assets to the way the entity manages its financial assets (‘business model’) and their contractual cash flow characteristics. In so doing, IFRS 9 significantly reduces complexity by eliminating the numerous rules associated with each classification category in IAS39. Consistently with all other financial assets, hybrid contracts with financial asset hosts are classified and measured in their entirety, thereby eliminating the complex and rule-based requirements in IAS 39 for embedded derivatives.Furthermore, IFRS 9 requires a single impairment method, which replaces the different impairment methods associated with the many classification categories in IAS 39. The Board believes that these changes will improve the ability of users to understand the financial reporting of financial assets and to better assess the amounts, timing and uncertainty of future cash flows.Measurement categoriesBC10Some users of financial statements support a single measurement method—fair value—for all financial assets. They view fair value as more relevant than other measurements in helping them to assess the effect of current economic events on an entity. They assert that having one measurement attribute for all financial assets promotes consistency in valuation, presentation and disclosure and improves the usefulness of financial statements.BC11However, many users and others, including many preparers and auditors of financial statements and regulators, do not support the recognition in the statement of comprehensive income of changes in fair value for financial assets that are not held for trading or are not managed on a fair value basis. Some users say that they often value an entity on the basis of its business model and that in some circumstances cost-based information provides relevant information that can be used to predict likely actual cash flows.BC12Some, including some of those who generally support the broad application of fair value for financial assets, raise concerns about the use of fair value when fair value cannot be determined within a narrow range. Those views were consistent with the general concerns raised during the financial crisis. Many also believe that other issues, including financial statement presentation, need to be addressed before a comprehensive fair value measurement requirement would be feasible.BC13In response to those views, the Board decided that measuring all financial assets at fair value is not the most appropriate approach to improving the financial reporting for financial instruments. Accordingly, the exposure draft proposed that entities should classify financial assets into two primary measurement categories: amortised cost and fair value (the ‘mixed attribute approach’).The Board noted that both of those measurement methods can provide useful information to users of financial statements for particular types of financial assets in particular circumstances.BC14Almost all respondents to the exposure draft supported the mixed attribute approach, stating that amortised cost provides relevant and useful information about particular financial assets in particular circumstances because it provides information about the entity’s likely actual cash flows. Some respondents said B608© IASCFIFRS 9 BC that fair value does not provide such information because it assumes that thefinancial asset is sold or transferred on the measurement date.BC15Accordingly, IFRS 9 requires some financial assets to be measured at amortised cost if particular conditions are met.Fair value information in the statements of financial position andfinancial performanceBC16Some respondents to the exposure draft proposed that fair value information should be presented in the statement of financial position for financial assetsmeasured at amortised cost. Some of those supporting such presentation said thatthe information provided would be more reliable and timely if it were required tobe presented in the statement of financial position rather than in the notes.BC17The Board also considered whether the total gains and losses for the period related to fair value measurements in Level 3 of the fair value measurementhierarchy (paragraph 27A of IFRS 7 Financial Instruments: Disclosures describes thelevels in the fair value hierarchy) should be presented separately in the statementof comprehensive income. Those supporting such presentation said that itsprominence would draw attention to how much of the total fair value gain or lossfor the period was attributable to fair value measurements that are subject tomore measurement uncertainty.BC18The Board decided that it would reconsider both issues at a future date. The Board noted that the Level 3 gains or losses for the period are required to be disclosed inthe notes to the financial statements in accordance with IFRS 7. The Board alsonoted that neither proposal had been exposed for public comment and furtherconsultation was required. The Board decided that these two issues should formpart of convergence discussions with the FASB.Approach to classificationBC19The exposure draft proposed that an entity should classify its financial assets into two primary measurement categories on the basis of the financial assets’characteristics and the entity’s business model for managing them. Thus, afinancial asset would be measured at amortised cost if two conditions were met:(a)the financial asset has only basic loan features; and(b)the financial asset is managed on a contractual yield basis.A financial asset that did not meet both conditions would be measured at fair value. BC20Most respondents supported classification based on the contractual terms of the financial asset and how an entity manages groups of financial assets. Althoughthey agreed with the principles proposed in the exposure draft, some did notagree with the way the approach was described and said that more applicationguidance was needed, in particular to address the following issues:(a)the order in which the two conditions are considered;(b)how the ‘managed on a contractual yield basis’ condition should beapplied; and(c)how the ‘basic loan features’ condition should be applied.© IASCF B609IFRS 9 BCBC21Most respondents agreed that the two conditions for determining how financial assets are measured were necessary. However, many questioned the order in which the two conditions should be considered. The Board agreed with those comment letters that stated that it would be more efficient for an entity to consider the business model condition first. Therefore, the Board clarified that entities would consider the business model first. However, the Board noted that the contractual cash flow characteristics of any financial asset within a business model that has the objective of collecting contractual cash flows must also be assessed to ensure that amortised cost provides relevant information to users.The entity’s business modelBC22The Board concluded that an entity’s business model affects the predictive quality of contractual cash flows—ie whether the likely actual cash flows will result primarily from the collection of contractual cash flows. Accordingly, the exposure draft proposed that a financial asset should be measured at amortised cost only if it is ‘managed on a contractual yield basis’. This condition was intended to ensure that the measurement of a financial asset provides information that is useful to users of financial statements in predicting likely actual cash flows.BC23Almost all respondents to the exposure draft agreed that classification and measurement should reflect how an entity manages its financial assets. However, most expressed concern that the term ‘managed on a contractual yield basis’would not adequately describe that principle and that more guidance was needed.BC24In August 2009 the FASB posted on its website a description of its tentative approach to classification and measurement of financial instruments. That approach also considers the entity’s business model. Under that approach, financial instruments would be measured at fair value through profit or loss unless:... an entity’s business strategy is to hold debt instruments with principal amounts forcollection or payment(s) of contractual cash flows rather than to sell or settle thefinancial instruments with a third party ...The FASB also provided explanatory text:... an entity’s business strategy for a financial instrument would be evaluated basedon how the entity manages its financial instruments rather than based on the entity’sintent for an individual financial instrument. The entity also would demonstrate thatit holds a high proportion of similar instruments for long periods of time relative totheir contractual terms.BC25The Board had intended ‘managed on a contractual yield basis’ to describe a similar condition. However, it decided not to use the FASB’s proposed guidance because the additional guidance included would still necessitate significant judgement. In addition, the Board noted that the FASB’s proposed approach might be viewed as very similar to the notion of ‘held to maturity’ in IAS 39, which could result in ‘bright line’ guidance on how to apply it. Most respondents believed the Board should avoid such bright lines and that an entity should be required to exercise judgement.B610© IASCFIFRS 9 BC BC26Therefore, in response to the concerns noted in paragraph BC23, the Board clarified the condition by requiring an entity to measure a financial asset at amortised cost only if the objective of the entity’s business model is to hold the financial asset to collect the contractual cash flows. The Board also clarified in the application guidance that:(a)it is expected that an entity may sell some financial assets that it holdswith an objective of collecting the contractual cash flows. Very fewbusiness models entail holding all instruments until maturity. However,frequent buying and selling of financial assets is not consistent with abusiness model of holding financial assets to collect contractual cash flows.(b)an entity needs to use judgement to determine at what level this conditionshould be applied. That determination is made on the basis of how anentity manages its business. It is not made at the level of an individualfinancial asset.BC27The Board noted that an entity’s business model does not relate to a choice (ie it is not a voluntary designation) but rather it is a matter of fact that can be observed by the way an entity is managed and information is provided to its management. BC28For example, if an investment bank uses a trading business model, it could not easily become a savings bank that uses an ‘originate and hold’ business model.Therefore, a business model is very different from ‘management intentions’which can relate to a single instrument. The Board concluded that sales or transfers of financial instruments before maturity would not be inconsistent witha business model with an objective of collecting contractual cash flows, as long assuch transactions were consistent with that business model, rather than with a business model that has the objective of realising changes in fair values.Contractual cash flow characteristicsBC29The exposure draft proposed that only financial instruments with basic loan features could be measured at amortised cost. It specified that a financial instrument has basic loan features if its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. For the purposes of this condition, interest is consideration for the time value of money and the credit risk associated with the principal amount outstanding during a particular period of time, which may include a premium for liquidity risk.BC30The objective of the effective interest method for financial instruments measured at amortised cost is to allocate interest revenue or expense to the relevant period.Cash flows that are interest always have a close relation to the amount advanced to the debtor (the ‘funded’ amount) because interest is consideration for the time value of money and the credit risk associated with the issuer of the instrument and with the instrument itself. The Board noted that the effective interest method is not an appropriate method to allocate cash flows that are not principal or interest on the principal amount outstanding. The Board concluded that if a financial asset contains contractual cash flows that are not principal or interest on the principal amount outstanding then a valuation overlay to contractual cash flows (fair value) is required to ensure that the reported financial information provides useful information.© IASCF B611IFRS 9 BCBC31Most respondents to the exposure draft agreed with the principle that classification should reflect the contractual terms of the financial asset. However, many objected to the label ‘basic loan features’ and requested more guidance to apply the principle to particular financial assets. Respondents were also concerned that the exposure draft did not discuss ‘immaterial’ or ‘insignificant’features that they believed ought not to affect classification.BC32The Board decided to clarify how contractual cash flow characteristics should affect classification and improve the examples that illustrate how the condition should be applied. It decided not to add application guidance clarifying that the notion of materiality applies to this condition, because that notion applies to every item in the financial statements. However, it did add application guidance that a contractual cash flow characteristic does not affect the classification of a financial asset if it is ‘not genuine’.Application of the two classification conditions to particular financial assetsInvestments in contractually linked instruments (tranches)BC33 A structured investment vehicle may issue different tranches to create a ‘waterfall’ structure that prioritises the payments by the issuer to the holders of the different tranches. In typical waterfall structures, multiple contractually linked instruments effect concentrations of credit risk in which payments to holders are prioritised. Such structures specify the order in which any losses that the issuer incurs are allocated to the tranches. The exposure draft concluded that tranches providing credit protection (albeit on a contingent basis) to other tranches are leveraged because they expose themselves to higher credit risk by writing credit protection to other tranches. Hence their cash flows do not represent solely payments of principal and interest on the principal amount outstanding. Thus, only the most senior tranche could have basic loan features and might qualify for measurement at amortised cost, because only the most senior tranche would receive credit protection in all situations.BC34The exposure draft proposed that the classification principle should be based on whether a tranche could provide credit protection to any other tranches in any possible scenario. In the Board’s view, a contract that contains credit concentration features that create ongoing subordination (not only in a liquidation scenario) would include contractual cash flows that represent a premium for providing credit protection to other tranches. Only the most senior tranche does not receive such a premium.BC35In proposing this approach, the Board concluded that subordination in itself should not preclude amortised cost measurement. The ranking of an entity’s instruments is a common form of subordination that affects almost all lending transactions. Commercial law (including bankruptcy law) typically sets out a basic ranking for creditors. This is required because not all creditors’ claims are contractual (eg claims regarding damages for unlawful behaviour and for tax liabilities or social insurance contributions). Although it is often difficult to determine exactly the degree of leverage resulting from this subordination, the Board believes that it is reasonable to assume that commercial law does not intend to create leveraged credit exposure for general creditors such as trade B612© IASCFIFRS 9 BC creditors. Thus, the Board believes that the credit risk associated with general creditors does not preclude the contractual cash flows representing the payments of principal and interest on the principal amount outstanding. Consequently, the credit risk associated with any secured or senior liabilities ranking above general creditors should also not preclude the contractual cash flows from representing payments of principal and interest on the principal amount outstanding.BC36Almost all respondents disagreed with the approach in the exposure draft for investments in contractually linked instruments for the following reasons:(a)It focused on form and legal structure rather than the economiccharacteristics of the financial instruments.(b)It would create structuring opportunities because of the focus on theexistence of a waterfall structure, without consideration of thecharacteristics of the underlying instruments.(c)It would be an exception to the overall classification model, driven byanti-abuse considerations.BC37In particular, respondents argued that the proposals in the exposure draft would conclude that some tranches provide credit protection and therefore were ineligible for measurement at amortised cost, even though that tranche might have a lower credit risk than the underlying pool of instruments that would themselves be eligible for measurement at amortised cost.BC38The Board did not agree that the proposals in the exposure draft were an exception to the overall classification model. In the Board’s view, those proposals were consistent with many respondents’ view that any financial instrument that creates contractual subordination should be subject to the proposed classification criteria and no specific guidance should be required to apply the classification approach to these instruments. However, it noted that, for contractually linked instruments that effect concentrations of credit risk, many respondents did not agree that the contractual cash flow characteristics determined by the terms and conditions of the financial asset in isolation best reflected the economic characteristics of that financial asset.BC39Respondents proposed other approaches in which an investor ‘looks through’ to the underlying pool of instruments of a waterfall structure and measures the instruments at fair value if looking through is not possible. They made the following points:(a)Practicability: The securitisation transactions intended to be addressed weregenerally over-the-counter transactions in which the parties involved hadsufficient information about the assets to perform an analysis of theunderlying pool of instruments.(b)Complexity: Complex accounting judgement was appropriate to reflect thecomplex economic characteristics of the instrument. In particular, in orderto obtain an understanding of the effects of the contractual terms andconditions, an investor would have to understand the underlying pool ofinstruments. Also, requiring fair value measurement if it were notpracticable to look through to the underlying pool of instruments wouldallow an entity to avoid such complexity.© IASCF B613。
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IAS 11 International Accounting Standard 11Construction ContractsThis version includes amendments resulting from IFRSs issued up to 31 December 2009.IAS 11 Construction Contracts was issued by the International Accounting Standards Committee in December 1993. It replaced IAS 11 Accounting for Construction Contracts (issued in March 1979). In May 1999 a paragraph was amended by IAS 10 Events After the Balance Sheet Date.In April 2001 the International Accounting Standards Board resolved that all Standards and Interpretations issued under previous Constitutions continued to be applicable unless and until they were amended or withdrawn.IAS 11 has been amended by the following IFRSs:•IAS23Borrowing Costs (as revised in March 2007)*•IAS1Presentation of Financial Statements (as revised in September 2007).*The following Interpretations and their accompanying documents refer to IAS 11:•SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease (issued December 2001 and subsequently amended)•SIC-32 Intangible Assets—Web Site Costs (issued March 2002 and subsequently amended)•IFRIC12Service Concession Arrangements(issued November 2006 and subsequently amended)•IFRIC15Agreements for the Construction of Real Estate (issued July 2008).**effective date 1 January 2009© IASCF A383IAS 11A384© IASCFC ONTENTSparagraphsINTERNATIONAL ACCOUNTING STANDARD 11CONSTRUCTION CONTRACTSOBJECTIVESCOPE1–2DEFINITIONS3–6COMBINING AND SEGMENTING CONSTRUCTION CONTRACTS7–10CONTRACT REVENUE11–15CONTRACT COSTS16–21RECOGNITION OF CONTRACT REVENUE AND EXPENSES22–35RECOGNITION OF EXPECTED LOSSES36–37CHANGES IN ESTIMATES38DISCLOSURE39–45EFFECTIVE DATE46ILLUSTRATIVE EXAMPLESDisclosure of accounting policiesThe determination of contract revenue and expensesContract disclosures FOR THE ACCOMPANYING DOCUMENT BELOW, SEE PART B OF THIS EDITIONIAS 11 International Accounting Standard 11 Construction Contracts (IAS 11) is set out in paragraphs 1–46. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 11 should be read in the context of its objective, the Preface to International Financial Reporting Standards and the Framework for the Preparation and Presentation of Financial Statements. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.© IASCF A385IAS 11International Accounting Standard 11Construction ContractsObjectiveThe objective of this Standard is to prescribe the accounting treatment ofrevenue and costs associated with construction contracts. Because of the natureof the activity undertaken in construction contracts, the date at which thecontract activity is entered into and the date when the activity is completedusually fall into different accounting periods. Therefore, the primary issue inaccounting for construction contracts is the allocation of contract revenue andcontract costs to the accounting periods in which construction work isperformed. This Standard uses the recognition criteria established in theFramework for the Preparation and Presentation of Financial Statements to determinewhen contract revenue and contract costs should be recognised as revenue andexpenses in the statement of comprehensive income. It also provides practicalguidance on the application of these criteria.Scope1This Standard shall be applied in accounting for construction contracts in the financial statements of contractors.2This Standard supersedes IAS 11 Accounting for Construction Contracts approved in 1978.Definitions3The following terms are used in this Standard with the meanings specified:A construction contract is a contract specifically negotiated for the construction ofan asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use.A fixed price contract is a construction contract in which the contractor agrees to afixed contract price, or a fixed rate per unit of output, which in some cases is subject to cost escalation clauses.A cost plus contract is a construction contract in which the contractor isreimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee.4 A construction contract may be negotiated for the construction of a single assetsuch as a bridge, building, dam, pipeline, road, ship or tunnel. A construction contract may also deal with the construction of a number of assets which are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use; examples of such contracts include those for the construction of refineries and other complex pieces of plant or equipment.A386© IASCFIAS 115For the purposes of this Standard, construction contracts include:(a)contracts for the rendering of services which are directly related to theconstruction of the asset, for example, those for the services of projectmanagers and architects; and(b)contracts for the destruction or restoration of assets, and the restoration ofthe environment following the demolition of assets.6Construction contracts are formulated in a number of ways which, for the purposes of this Standard, are classified as fixed price contracts and cost plus contracts. Some construction contracts may contain characteristics of both a fixed price contract and a cost plus contract, for example in the case of a cost plus contract with an agreed maximum price. In such circumstances, a contractor needs to consider all the conditions in paragraphs 23 and 24 in order to determine when to recognise contract revenue and expenses.Combining and segmenting construction contracts7The requirements of this Standard are usually applied separately to each construction contract. However, in certain circumstances, it is necessary to apply the Standard to the separately identifiable components of a single contract or toa group of contracts together in order to reflect the substance of a contract or agroup of contracts.8When a contract covers a number of assets, the construction of each asset shall be treated as a separate construction contract when:(a)separate proposals have been submitted for each asset;(b)each asset has been subject to separate negotiation and the contractor andcustomer have been able to accept or reject that part of the contractrelating to each asset; and(c)the costs and revenues of each asset can be identified.9 A group of contracts, whether with a single customer or with several customers,shall be treated as a single construction contract when:(a)the group of contracts is negotiated as a single package;(b)the contracts are so closely interrelated that they are, in effect, part of asingle project with an overall profit margin; and(c)the contracts are performed concurrently or in a continuous sequence.10 A contract may provide for the construction of an additional asset at the optionof the customer or may be amended to include the construction of an additional asset. The construction of the additional asset shall be treated as a separate construction contract when:(a)the asset differs significantly in design, technology or function from theasset or assets covered by the original contract; or(b)the price of the asset is negotiated without regard to the originalcontract price.© IASCF A387IAS 11Contract revenue11Contract revenue shall comprise:(a)the initial amount of revenue agreed in the contract; and(b)variations in contract work, claims and incentive payments:(i)to the extent that it is probable that they will result in revenue; and(ii)they are capable of being reliably measured.12Contract revenue is measured at the fair value of the consideration received or receivable. The measurement of contract revenue is affected by a variety of uncertainties that depend on the outcome of future events. The estimates often need to be revised as events occur and uncertainties are resolved. Therefore, the amount of contract revenue may increase or decrease from one period to the next.For example:(a) a contractor and a customer may agree variations or claims that increase ordecrease contract revenue in a period subsequent to that in which thecontract was initially agreed;(b)the amount of revenue agreed in a fixed price contract may increase as aresult of cost escalation clauses;(c)the amount of contract revenue may decrease as a result of penaltiesarising from delays caused by the contractor in the completion of thecontract; or(d)when a fixed price contract involves a fixed price per unit of output,contract revenue increases as the number of units is increased.13 A variation is an instruction by the customer for a change in the scope of the workto be performed under the contract. A variation may lead to an increase or a decrease in contract revenue. Examples of variations are changes in the specifications or design of the asset and changes in the duration of the contract.A variation is included in contract revenue when:(a)it is probable that the customer will approve the variation and the amountof revenue arising from the variation; and(b)the amount of revenue can be reliably measured.14 A claim is an amount that the contractor seeks to collect from the customer oranother party as reimbursement for costs not included in the contract price.A claim may arise from, for example, customer caused delays, errors inspecifications or design, and disputed variations in contract work.The measurement of the amounts of revenue arising from claims is subject to a high level of uncertainty and often depends on the outcome of negotiations.Therefore, claims are included in contract revenue only when:(a)negotiations have reached an advanced stage such that it is probable thatthe customer will accept the claim; and(b)the amount that it is probable will be accepted by the customer can bemeasured reliably.A388© IASCFIAS 11 15Incentive payments are additional amounts paid to the contractor if specified performance standards are met or exceeded. For example, a contract may allow for an incentive payment to the contractor for early completion of the contract.Incentive payments are included in contract revenue when:(a)the contract is sufficiently advanced that it is probable that the specifiedperformance standards will be met or exceeded; and(b)the amount of the incentive payment can be measured reliably. Contract costs16Contract costs shall comprise:(a)costs that relate directly to the specific contract;(b)costs that are attributable to contract activity in general and can beallocated to the contract; and(c)such other costs as are specifically chargeable to the customer under theterms of the contract.17Costs that relate directly to a specific contract include:(a)site labour costs, including site supervision;(b)costs of materials used in construction;(c)depreciation of plant and equipment used on the contract;(d)costs of moving plant, equipment and materials to and from the contractsite;(e)costs of hiring plant and equipment;(f)costs of design and technical assistance that is directly related to thecontract;(g)the estimated costs of rectification and guarantee work, including expectedwarranty costs; and(h)claims from third parties.These costs may be reduced by any incidental income that is not included in contract revenue, for example income from the sale of surplus materials and the disposal of plant and equipment at the end of the contract.18Costs that may be attributable to contract activity in general and can be allocated to specific contracts include:(a)insurance;(b)costs of design and technical assistance that are not directly related to aspecific contract; and(c)construction overheads.© IASCF A389IAS 11Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. The allocation is based on the normal level of construction activity. Construction overheads include costs such as the preparation and processing of construction personnel payroll. Costs that may be attributable to contract activity in general and can be allocated to specific contracts also include borrowing costs.19Costs that are specifically chargeable to the customer under the terms of the contract may include some general administration costs and development costs for which reimbursement is specified in the terms of the contract.20Costs that cannot be attributed to contract activity or cannot be allocated to a contract are excluded from the costs of a construction contract. Such costs include:(a)general administration costs for which reimbursement is not specified inthe contract;(b)selling costs;(c)research and development costs for which reimbursement is not specifiedin the contract; and(d)depreciation of idle plant and equipment that is not used on a particularcontract.21Contract costs include the costs attributable to a contract for the period from the date of securing the contract to the final completion of the contract. However, costs that relate directly to a contract and are incurred in securing the contract are also included as part of the contract costs if they can be separately identified and measured reliably and it is probable that the contract will be obtained.When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period.Recognition of contract revenue and expenses22When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract shall be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period.An expected loss on the construction contract shall be recognised as an expense immediately in accordance with paragraph 36.23In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied:(a)total contract revenue can be measured reliably;(b)it is probable that the economic benefits associated with the contract willflow to the entity;(c)both the contract costs to complete the contract and the stage of contractcompletion at the end of the reporting period can be measured reliably; and A390© IASCFIAS 11(d)the contract costs attributable to the contract can be clearly identified andmeasured reliably so that actual contract costs incurred can be comparedwith prior estimates.24In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied:(a)it is probable that the economic benefits associated with the contract willflow to the entity; and(b)the contract costs attributable to the contract, whether or not specificallyreimbursable, can be clearly identified and measured reliably.25The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed.This method provides useful information on the extent of contract activity and performance during a period.26Under the percentage of completion method, contract revenue is recognised as revenue in profit or loss in the accounting periods in which the work is performed. Contract costs are usually recognised as an expense in profit or loss in the accounting periods in which the work to which they relate is performed.However, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately in accordance with paragraph 36.27 A contractor may have incurred contract costs that relate to future activity on thecontract. Such contract costs are recognised as an asset provided it is probable that they will be recovered. Such costs represent an amount due from the customer and are often classified as contract work in progress.28The outcome of a construction contract can only be estimated reliably when it is probable that the economic benefits associated with the contract will flow to the entity. However, when an uncertainty arises about the collectibility of an amount already included in contract revenue, and already recognised in profit or loss, the uncollectible amount or the amount in respect of which recovery has ceased to be probable is recognised as an expense rather than as an adjustment of the amount of contract revenue.29An entity is generally able to make reliable estimates after it has agreed to a contract which establishes:(a)each party’s enforceable rights regarding the asset to be constructed;(b)the consideration to be exchanged; and(c)the manner and terms of settlement.It is also usually necessary for the entity to have an effective internal financial budgeting and reporting system. The entity reviews and, when necessary, revises the estimates of contract revenue and contract costs as the contract progresses.The need for such revisions does not necessarily indicate that the outcome of the contract cannot be estimated reliably.© IASCF A391IAS 1130The stage of completion of a contract may be determined in a variety of ways.The entity uses the method that measures reliably the work performed.Depending on the nature of the contract, the methods may include:(a)the proportion that contract costs incurred for work performed to datebear to the estimated total contract costs;(b)surveys of work performed; or(c)completion of a physical proportion of the contract work.Progress payments and advances received from customers often do not reflect the work performed.31When the stage of completion is determined by reference to the contract costs incurred to date, only those contract costs that reflect work performed are included in costs incurred to date. Examples of contract costs which are excluded are:(a)contract costs that relate to future activity on the contract, such as costs ofmaterials that have been delivered to a contract site or set aside for use in acontract but not yet installed, used or applied during contractperformance, unless the materials have been made specially for thecontract; and(b)payments made to subcontractors in advance of work performed under thesubcontract.32When the outcome of a construction contract cannot be estimated reliably:(a)revenue shall be recognised only to the extent of contract costs incurredthat it is probable will be recoverable; and(b)contract costs shall be recognised as an expense in the period in which theyare incurred.An expected loss on the construction contract shall be recognised as an expense immediately in accordance with paragraph 36.33During the early stages of a contract it is often the case that the outcome of the contract cannot be estimated reliably. Nevertheless, it may be probable that the entity will recover the contract costs incurred. Therefore, contract revenue is recognised only to the extent of costs incurred that are expected to be recoverable.As the outcome of the contract cannot be estimated reliably, no profit is recognised. However, even though the outcome of the contract cannot be estimated reliably, it may be probable that total contract costs will exceed total contract revenues. In such cases, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately in accordance with paragraph 36.34Contract costs that are not probable of being recovered are recognised as an expense immediately. Examples of circumstances in which the recoverability of contract costs incurred may not be probable and in which contract costs may need to be recognised as an expense immediately include contracts:(a)that are not fully enforceable, ie their validity is seriously in question;A392© IASCFIAS 11(b)the completion of which is subject to the outcome of pending litigation orlegislation;(c)relating to properties that are likely to be condemned or expropriated;(d)where the customer is unable to meet its obligations; or(e)where the contractor is unable to complete the contract or otherwise meetits obligations under the contract.35When the uncertainties that prevented the outcome of the contract being estimated reliably no longer exist, revenue and expenses associated with the construction contract shall be recognised in accordance with paragraph 22 rather than in accordance with paragraph 32.Recognition of expected losses36When it is probable that total contract costs will exceed total contract revenue, the expected loss shall be recognised as an expense immediately.37The amount of such a loss is determined irrespective of:(a)whether work has commenced on the contract;(b)the stage of completion of contract activity; or(c)the amount of profits expected to arise on other contracts which are nottreated as a single construction contract in accordance with paragraph 9. Changes in estimates38The percentage of completion method is applied on a cumulative basis in each accounting period to the current estimates of contract revenue and contract costs. Therefore, the effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate (see IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors). The changed estimates are used in the determination of the amount of revenue and expenses recognised in profit or loss in the period in which the change is made and in subsequent periods. Disclosure39An entity shall disclose:(a)the amount of contract revenue recognised as revenue in the period;(b)the methods used to determine the contract revenue recognised in theperiod; and(c)the methods used to determine the stage of completion of contracts inprogress.© IASCF A393IAS 1140An entity shall disclose each of the following for contracts in progress at the end of the reporting period:(a)the aggregate amount of costs incurred and recognised profits(less recognised losses) to date;(b)the amount of advances received; and(c)the amount of retentions.41Retentions are amounts of progress billings that are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified. Progress billings are amounts billed for work performed on a contract whether or not they have been paid by the customer. Advances are amounts received by the contractor before the related work is performed.42An entity shall present:(a)the gross amount due from customers for contract work as an asset; and(b)the gross amount due to customers for contract work as a liability.43The gross amount due from customers for contract work is the net amount of:(a)costs incurred plus recognised profits; less(b)the sum of recognised losses and progress billingsfor all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds progress billings.44The gross amount due to customers for contract work is the net amount of:(a)costs incurred plus recognised profits; less(b)the sum of recognised losses and progress billingsfor all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).45An entity discloses any contingent liabilities and contingent assets in accordance with IAS 37 Provisions, Contingent Liabi ities and Contingent Assets. Contingent liabilities and contingent assets may arise from such items as warranty costs, claims, penalties or possible losses.Effective date46This Standard becomes operative for financial statements covering periods beginning on or after 1January 1995.A394© IASCF。