Recognition of Revenue From Construction Contracts According to IFRS

Table of contents

List of abbreviations

I Introduction

II Revenue Recognition under IFRS
1. Purpose of International Financial Reporting Standards
a) Information function
aa) General objective of decision usefulness
bb) Limited role of stewardship
b) Qualitative characteristics of financial statements
aa) Relevance as the dominating criterion
bb) Reliability within the concept of faithful representation
cc) Enhancing qualitative characteristics
2. Revenue recognition under IFRS - Two competing approaches
a) Asset-liability view
b) Revenue-expense view
c) Inconsistencies in revenue recognition under IFRS

III Analysis of the impact of IFRS 15 on the construction industry
1. Characteristics and risks related to construction and real estate
2. Department of construction contracts into separate performance obligations.
a) Scope and definition of contracts with customers
b) Identification of separate performance obligations
aa) Distinct goods and services as the key criteria for separability
bb) Combined output through integrating services - A relevant exception
cc) Little guidance on separation of performance obligation under old revenue standards
3. Satisfaction of performance obligations based on the concept of control
a) Concept of control
b) Distinction between different types of performance obligations
aa) Revenue recognition at point in time
bb) Revenue recognition over a period of time - Often the case of construction contracts
aaa) Simultaneous receipt and consumption of benefits
bbb) Performance and enhancement of an asset under customers control
ccc) Creation of an asset with no alternative use and an enforceable right to payment
i) Explanation and meaning
ii) Expansion of the Percentage-of-completion method- A critical evaluation
iii) Consequences for the sale of real estate
4. Measuring progress towards completion
a) Reasonable measures of progress
b) Input methods experience stronger regulations under IFRS 15
c) Output methods
5. Capitalization of pre-contract incremental costs

IV Conclusion
References for quoted literature
Documents from standard-setting bodies
References for standard setting documents
References for quoted laws