[Illustrative Checklist] Disclosure requirements under AS 7 | Construction Contracts
- Blog|News|Account & Audit|
- 2 Min Read
- By Taxmann
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- Last Updated on 20 January, 2023
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The objective of AS 7, Construction Contracts, is to prescribe the accounting treatment of revenue and costs associated with construction contracts. Because of the nature of the activity undertaken in construction contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different accounting periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the accounting periods in which construction work is performed. This Standard uses the recognition criteria established in the Framework for the Preparation and Presentation of Financial Statements to determine when contract revenue and contract costs should be recognized as revenue and expenses in the statement of profit and loss. It also provides practical guidance on the application of these criteria.
As per the stipulation of this standard, an entity must comply with the below-mentioned disclosure requirements:
I. Has the entity disclosed the following:
(a) The amount of contract/project revenue recognized as revenue in the period
(b) The methods used to determine the contract/project revenue recognized in the period
(c) The methods used to determine the stage of completion of contracts/projects in progress
II. Apart from disclosures required AS-7, the following disclosures have also been made for the projects in progress at the end of the reporting period:
(a) Amount of work in progress and the value of inventories
(b) Excess of revenue recognized over actual bills raised (unbilled revenue)
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