Stock: meaning of: construction contracts
Construction contracts are defined in FRS102 as:
`A contract specifically negotiated for the construction of an 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).’
When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as income and expenses by reference to the stage of completion of the contract at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, a provision is included for the expected loss. Profits and losses recognised in accordance with GAAP are recognised for tax purposes.