Ind AS 11, Construction Contracts: Ind AS 11 prescribes 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.
Scope of Ind AS 11The Standard shall be applied in accounting for construction contracts in the financial statements of contractors. 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.
Recognition of contract revenue and expensesWhen the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract shall be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period.
Recognition of expected losses
Difference Between Ind AS 11 and AS 7
|AS 7||Ind AS 11|
|Contract revenue is measured at consideration received or receivable (without considering the fair value)||Contract Revenue is measured at the fair value of the consideration received or receivable|
|As per AS 7, costs that can be attributed to “Contract Activity in general” and which can be allocated to specific contracts are considered as Contract Costs. Such costs include borrowing costs as per AS 16.||Ind AS 11 does not include borrowing costs as a part of Contract Cost.|
|Does not deal with accounting for Service Concession Arrangements.||Appendix A of Ind AS 11 deals with accounting aspect involved in such arrangements.