What is Construction Contract Accounting?
Construction contract accounting is the recognition of revenue and costs from long-term construction contracts, typically using the percentage-of-completion method under IFRS 15.
How It Works
- Estimate total contract revenue and costs.
- Measure progress using costs incurred, output, or milestones.
- Recognize revenue and costs in proportion to progress.
Saudi Context
Saudi contractors building Vision 2030 projects under long-term EPC contracts apply IFRS 15 percentage-of-completion. ZATCA expects VAT to follow tax-point rules tied to invoicing milestones.
Example
A SAR 500 million contract with SAR 100 million costs incurred against a SAR 400 million total estimate is 25% complete — SAR 125 million revenue is recognized.