[thisismyname]

Hey everyone, Becker recently updated the FAR module with the following announcement:

Replacement of content on long-term construction contracts, as the AICPA has confirmed that “percentage-of completion” and “completed contracts” methods are no longer tested because they are outdated under ASC 606.

But later on in the document they also mention:

Previous methods of revenue recognition for long-term construction contracts include the “completed contract” method and the “percentage-of-completion” method. Although current revenue recognition standards no longer refer to these methods by name, they may still be used in practice and are still used for tax purposes. The underlying timing concepts related to the completed contract method (recognition of revenue at a point in time) and the percentage-of-completion method (recognition of revenue over time) continue to be appropriate.

Unfortunately I just spent a lot of time learning how to record the JEs under the % of completion method using the CIP and Progress Billings accounts. Will we now be tested a different way on recognizing construction revenue?

[freecloud]

Really? oh, we have at the same boat. Since I just spent more time on learning how to do the calculations like last week. They are no longer to be tested?

[jombe]

Weird… I work for a contractor and we use % of completion to recognize our revenue. One of the top 25 CPA firms audit us and they haven't said anything about our revenue recognition methodology on our last audit.

FAR - 94 (10/4/15), Local Prep Online Lectures, BISK & NINJA MCQ
AUD - 99 (1/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
REG - 96 (4/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
BEC - 91 (7/19/16), Local Prep Online Lectures, BISK & NINJA MCQ

581 days of listening to lectures, reading texts & 10,000+ MCQs...

[jeff]

It's mostly semantics with the new standard – there are some additional hoops to jump through.

This is how we've handled updating the questions with NINJA – because construction accounting didn't just change materially due to the new standard.

***

Lake Construction Company has consistently used the input method prescribed in ASC 606 and recognizes revenue over time. During year 1, Lake entered into a fixed-price contract to construct an office building for $10,000,000. Information relating to the contract is as follows:

(blah blah)

The performance by Lake does not create an asset with an alternative use and Lake has an enforceable right to payment for the completed performance to date. 

Contract costs incurred during year 2 were

***

This incorporates the additional hoops into the question.

[Author]

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