Accounting Standards Interpretation (ASI) 29
Turnover in case of Contractors
Accounting Standard (AS) 7, Construction Contracts
1. AS 7, Construction Contracts (revised 2002) deals, inter alia, with revenue recognition in respect of construction contracts in the financial statements of contractors. It requires recognition of revenue by reference to the stage of completion of a contract (referred to as ‘percentage of completion method’).Thismethod results in reportingof revenuewhich can be attributed to the proportion of work completed. Under thismethod, contract revenue is recognised as revenue in the statement of profit and loss in the accounting period in which the work is performed.
The issue is whether the revenue so recognised in the financial statements of contractors as per the requirements of AS 7 can be considered as ‘turnover’.