Right across the Taiwan Strait Accounting Standards - a long-term construction contracts A Comparative Analysis of

1、 Right across the Taiwan Strait Accounting Standards - a long-term construction contracts A Comparative Analysis of A long-term construction contracts is the construction project schedule more than one year contract. The Ministry of Finance June 25, 1998 “issued by the criteria - construction contra

2、cts and our province July 20, 1987 published in “long-term construction contract accounting standards were on the construction contractors, the accounting treatment of construction contract been standardized. A structural comparison between the two criteria are as follows: “Accounting Standards for

3、Enterprises - Construction Contracts by: Introduction, definition, contract and contract combined discrete, contract revenues, contract costs, contract revenue and contract costs of the confirmation, disclosure, Supplementary and other parts. “Long-term construction contract accounting standards by:

4、 Foreword, notes, the choice of accounting methods, engineering costs and handling, engineering, the recognized gains and losses, the financial statements should express the matter, by-laws and other parts. “Accounting Standards for Enterprises - Construction Contracts, in addition to the long-term

5、construction contracts, to regulate, but also on short-term construction contracts (duration in a year), made specifications. In this paper, only the long-term guidelines for the construction of the two sides of business contracts specifications for comparison. 1, contract revenue and contract costs

6、, the concept of 1, the contract revenue. “Accounting Standards for Enterprises - Construction Contracts (hereinafter referred to as “guidelines for the construction contract) on the composition and the initial contract revenue recognized clearly defined. Initial recognition is for information can b

7、e converted into accounting information into the accounting system confirmation. Contract income mainly includes: (1) the initial amount of revenue specified in the contract. This is the basic content of the contract revenue. (2) due to contract changes, claims and incentive payments. This part of i

8、ncome is additional income. Guidelines for contract changes, claims and awards section shall have made clear. “Long-term construction contract accounting standards (hereinafter referred to as “long-term contract Guidelines), does not contain similar provisions. 2, the contract cost. Guidelines for t

9、he cost of the two sides of the contract are clearly defined content and deal with content much the same. Only “criteria for the construction contract, a more detailed listing of the contents of the contract costs and more operational. Second, the contract accounting methods Accounting treatment of

10、contracts, that is, the contract revenues and expenses confirmation. Here again, the confirmation is to confirm, once again confirmed that refers to the books of accounting information system output to identify, in order to determine what information is included in the financial statements. Confirma

11、tory methods are commonly used internationally, there are two: First, fully completed Act 2 is the percentage of completion method. Full completion method has the advantage of a clear and objective gains and losses, in the pre-completion is not expected to return, consistent with sound principles; d

12、rawback is that recognition of gains and losses can not cope with the progress of works. Completion ratio method has the advantage of gains and losses able to cope with the progress of works during construction to confirm, can reflect the implementation of the contract; drawback is that the construc

13、tion phases of the profit and loss and determine the progress of the works depends on a variety of expected more subjective. “Construction Contract Guidelines, to require enterprises to the general percentage of completion method should be used (ie, the proportion of completion method); while “long-

14、term contract guidelines, can choose to use all of the provisions of law and the completion percentage of completion method, but the percentage of completion method is recommended. The selection of the methods described above, the two sides are set to first and reasonable criteria to determine wheth

15、er the results of a reliable estimate of the contract. 1, if the contract outcome can be reliably estimated percentage of completion method should be used. The results of the contract can be estimated reliably, the two sides criteria to a fixed price contract and cost-plus contracts were set criteri

16、a for judging. The results of the fixed price contract can be reliably estimated, “guidelines for the construction contract shall also meet the following conditions: (a) contract revenue can be reliably measured; (2) the economic benefits associated with the contract will flow to the enterprise; (3)

17、 in assets and liabilities sheet date and for the completion of a contract still need to complete the contract costs incurred can be reliably determined; (4) for the completion of the contract have taken place in contract costs can be clearly identified and measured reliably so that actual contract

18、costs can be compared with the previous estimated cost of comparison. The “long-term contract guidelines, shall meet the following conditions: (1) accounts receivable may be a reasonable estimate of total project price; (2) to perform the contract to be completed by the end of input costs, and may b

19、e a reasonable estimate of the degree; (3) attributable to the contract The costs can be reasonably identified. The results of the cost-plus contracts can be reliably estimated, “guidelines for the construction contract shall also meet the following conditions: (1) the economic benefits associated w

20、ith the contract will flow to the enterprise; (2) the actual contract costs incurred can be clearly identified and can be reliably measured. The “long-term contract guidelines, shall meet the following conditions: (1) attributable to the cost of the contract can reasonably be identified; (2) In addi

21、tion to determining the expenditure may be owned by mats, the rest of the contract costs can be reasonably estimated. 2, if the contract outcome can not be reliably estimated, “long-term contract guidelines, which allows for full completion method. The “guidelines for the construction contract provi

22、des for the distinction between two kinds of circumstances: (a) contract costs can be recovered, and contract revenue can be recovered to confirm the actual contract costs, contract costs should be recognized as an expense occurred in the current period; (2) Contract costs can not be recovered, shou

23、ld be recognized as an expense immediately when incurred, not to confirm income. In my opinion, doing so based on more subjective judgments, it is recommended that if the results of the contract can not be reliably estimated, but also make use of all completion method is appropriate. Third, the cont

24、racts accounting treatment Accounting treatment on both sides of the basic idea is the same. Are shown below: 1, accounting methods. There are two ways of accounting for the contract: Total France and the net method. Method is based on the total cost of contract revenue and total reflection methods;

25、 net method is based on net income minus expenses reflect the approach. “Construction Contract Guidelines, the accounting method used the total amount, while the “long-term contract guidelines, the two kinds of methods can be used. The proportion of the adoption of completion method, contract revenu

26、e and costs of measurement methods, the two sides have different requirements. (1) “construction contract guidelines, the provisions of the income and expenses for the following formula: Contract revenue recognized in the period = (total contract revenue × completion progress) - prior fiscal ye

27、ar, the accumulated revenue recognized in Maori contracts recognized in the period = (total contract revenue - estimated total cost of the contract) × completion schedule - prior fiscal year, accumulated gross profits that have been identified Contract costs recognized in the period = contract

28、revenue recognized in the period - gross profit recognized in the period the contract - before the fiscal year is expected to losses Started in previous fiscal years for completion this year, contracts, current measurement and recognition of contract revenue is equal to the total contract revenue ov

29、er prior fiscal year, the accumulated revenue recognized in the balance; current measurement and recognition of the cost of the contract is equal to the total cumulative actual cost of previous fiscal year, net of accumulated balance of costs identified. (2) “criteria for long-term contract, provide

30、s that: “With the completion percentage of law, the proportion of each phase should be completed by the end of the interest calculation of total project has been recognized less cumulative advance the interests of, as the interests of current projects. But it has been recognized pre - out of the acc

31、umulated benefits beyond the current period for completion by the end of the calculation of the cumulative proportion of interest, the excess should be lost as current projects. “This approach is the first calculation of contract revenue recognized in the period, and then calculating contract costs

32、recognized in the period, according to After subtracting the balance between current contract revenue recognized. Although criteria for the contract the two sides of the calculation process proceeds in different, but the result is the same. Therefore, I believe that enterprises can according to thei

33、r own situation, choose the view that a more simple, convenient, easy to understand method of accounting. 2, chart of accounts set up. In order to contract-related accounting matters of accounting, the “guidelines for the construction contract, Guide to set up the following accounting courses: (1) “

34、construction or “production cost accounting of the actual contract costs and gross margin; (2) “ project settlement, “the progress of completion accounting under the contract to the customer billing billings; (3) receivable “accounts receivable and actual income of the progress payments, received in

35、 advance get the materials ready models; (4) main business income “, accounting for contract revenue recognized in the period; (5) core business costs “, accounting for contract costs recognized in the period. “Long-term contract guidelines, were set the following five subjects: (1) “construction pr

36、oject; (2) “project payments received in advance; (3) “receivable for projects; (4) “Project revenue; (5) “project costs. 3, the contract is expected to deal with losses. Guidelines provide that if the two sides the estimated total contract costs will exceed total revenues, expected loss should be i

37、mmediately recognized as current period charges. But the loss is expected to deal specifically with the two sides have different approaches. “Long-term contract guidelines for direct loss would be expected to included in “cost of the project. The “guidelines for the construction contract is a separa

38、te “contract losses are expected, subjects, accounting for the expected current losses, while set up “expects losses subjects, provision for loss reserves; expected loss occurs when the debit “contract losses are expected, loan - remember the “pre-recorded losses. A different view of the above point

39、s, the following example. Cases A company was contracted in early 1996, a project is scheduled for three years to complete engineering package price of 580,000 yuan. Other information is as follows: Note: The 1996 schedule for completion = 154,000 ÷ 4550,000 = 28%; 1997 for completion of progre

40、ss = 480,000 ÷ 600,000 = 80% (B) measurement confirmed that the annual income, expenses and gains and losses: Registration of the actual contract costs incurred each year (154,000,326,000,70,000), registration of the project have been clearing price, (180,000,300,000,11,000), and the actual reg

41、istration of the project have been received the price (170,000,240,000,170,000), which were seen in the balance of the above information. Registration recognized revenue, expenses and gains and losses, recorded in addition to its sub-title used by subjects are different in accordance with their own

42、guidelines to deal with exactly the same. “Construction Contract Guidelines entry as follows: (1996) by: Engineering Construction - Maori 8,400 Main business costs 154,000 Credit: Income from principal operations 162,400 (1997) by: Cost of 326,000 Credit: Income from principal operations 301,600 Con

43、struction - Maori 24,400 By: Contract losses estimated 4,000 Credit: expected losses 4,000 (1998) by: Engineering Construction - Maori 46,000 Cost of 66,000 Expected losses 4,000 Credit: Income from principal operations 116,000 By: Engineering 580,000 Settlement Credit: Construction - Maori 30,000 C

44、onstruction 550,000 “Long-term contract guidelines entry as follows: (1996) by: In the construction costs of 8,400 Project Cost 154,000 Credit: Project revenue 162,400 (1997) by: project costs 330,000 Credit: Project revenue 301,600 Construction in progress 28,400 (1998) by: construction in progress

45、 50000 Project Cost 66,000 Credit: Project revenue 116,000 By: received in advance for projects 580,000 Credit: Construction in progress 580,000 Contract loss process: “Construction Contract Guidelines calculation process: * Estimated = loss will occur next month, the estimated cost of the next issu

46、e yet to occur - the next period should be recognized income = estimated cost of the next issue yet to happen - (The total revenue - to issue only accumulated earnings) = 120,000 - (580 ,000-464, 000) = 4,000 4, the information disclosure Criteria of the contract the two sides of information disclosure requirements are different. “