Contract Revenue

Contract revenue should comprise:

  • Variations in contract work, claims and incentive payments:
  • The initial amount of revenue agreed in the construction contract;
  • To the extent that it is probable that they will result in revenue; and
  • They are capable of being reliably measured.

Contract revenue is measured at 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 contractor and a customer may agree to variations or claims that increase or decrease contract revenue in a period subsequent to that in which the contract was initially 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/ decreases as the number of units is increased/decreased.

Get industry recognized certification – Contact us

Menu