TMI BlogIII - Construction contracts (w.e.f. AY 2017-18)X X X X Extracts X X X X X X X X Extracts X X X X ..... tation and Disclosure Standard, the provisions of the Act shall prevail to that extent. Scope 1. This Income Computation and Disclosure Standard should be applied in determination of income for a construction contract of a contractor. Definitions 2 (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified: ( a ) Construction contract is 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 and includes : ( i ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning respectively assigned to them in the Act. 3. A construction contract may be negotiated for the construction of a single asset. A construction contract may also deal with the construction of a number of assets which are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. 4. Construction contracts are formulated in a number of ways which, for the purposes of this Income Computation and Disclosure Standard, are classified as fixed price contracts and cost plus contracts. Some construction contracts may contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gotiated as a single package; ( b ) the contracts are so closely interrelated that they are, in effect, part of a single project with an overall profit margin; and ( c ) the contracts are performed concurrently or in a continuous sequence. 8. Where a contract provides for the construction of an additional asset at the option of the customer or is amended to include the construction of an additional asset, the construction of the additional asset should be treated as a separate construction contract when: ( a ) the asset differs significantly in design, technology o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; ( c ) such other costs as are specifically chargeable to the customer under the terms of the contract; and ( d ) allocated borrowing costs in accordance with the Income Computation and Disclosure Standard on Borrowing Costs. These costs shall be reduced by any incidental income, not being in the nature of interest, dividends or capital gains, that is not included in contract revenue. 13. Costs that cannot be attributed to any contract activity or cannot be allocated to a contract shall be excluded from the costs of a construction contract. 14. Contract costs include the costs attributable to a contract for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted. 18. The stage of completion of a contract shall be determined with reference to: ( a ) the proportion that contract costs incurred for work performed upto the reporting date bear to the estimated total contract costs; or ( b ) surveys of work performed; or ( c ) completion of a physical proportion of the contract work. Progress payments and advances received from customers are not determinative of the stage of completion of a contract. 19. When the stage of completion is determined by reference to the contract costs incurred upto the reporting date, onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be recognised based on the method regularly followed by the person prior to the previous year beginning on the 1st day of April, 2016. Disclosure 23. A person shall disclose: ( a ) the amount of contract revenue recognised as revenue in the period; and ( b ) the methods used to determine the stage of completion of contracts in progress. 24. A person shall disclose the following for contracts in progress at the reporting date, namely:- ( a ) amount of costs incurred and recognised profits (less recognised losses) upto the reporting date; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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