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July 25, 2016 at 8:46 pm
I will appreciate if you could help me with the accounting treatment.
1- Suppose contract price is $100 Million and the cost is $50 Million, if 10% of the work is completed by the 1st yr end, and it isn’t sufficient to be able to predict the ultimate outcome.
Thus, in year 1 revenue and the cost we recognize will be $ 10million right so that the profit recognized becomes 0?
2- what if we predict loss when the work completed isn’t sufficient enough to be able to predict the outcome, do we recognize the loss in such case?
April 20, 2016 at 5:47 am
Not as a replica. They DO illustrate a method of computing stage reached and calculation of appropriate revenue and costs but in the course notes there is a separate chapter on IFRS 15 (from memory)
May 1, 2016 at 3:40 pm
Where i can get the rest video of examples solved?
Example 2, 3, 4 and 5?
Please help me out.
May 1, 2016 at 3:41 pm
Sorry, i have fetched the other lectures as well.
Thanks for your goo lecturing, really helpful.
April 20, 2016 at 3:28 am
hi mike can these videos work as a replica of ifrs 15
February 23, 2016 at 4:42 pm
Hi Mike, One of my friend was telling me that IAS 11 is not part of course anymore. Is this correct? Thanks
February 24, 2016 at 9:03 am
That’s correct – it’s no longer in the syllabus. The same as IAS 18 Revenue
Both have been replaced by IFRS 15
But the calculations shown in the notes are still viable and potentially still the subject of an exam question
November 12, 2015 at 4:42 pm
I think you will find that it actually was the English boring machine that was buried somewhere in the middle of the tunnel. The French one on the other hand, was placed on eBay!
For the record, that was best 39,999 I ever spent. It was a shame that the Royal Mail thought it was too big for it to be delivered through the door though! 🙂
November 12, 2015 at 4:57 pm
Yes, it has been pointed out to me earlier that it was the English one that was stripped of all moveable parts and then abandoned although I didn’t know that the French one was put up for sale on ebay (if that’s true)
And I know that it’s not true that you picked it up for 39,999 – you’re pulling my chain! You must have paid much more than that 🙂
November 12, 2015 at 5:04 pm
Well Mike it certainly appeared like I was going to pay more for it when no-good hoaxers started bidding on it just for fun. Thankfully eBay took action and suspended those time-wasters and allowed us serious bidders to get on with it.
So yes, it is sitting proudly on my mantelpiece as we speak! But worry not, the item was fully depreciated by the Eurotunnel, and I was just about to suggest that they obtained full capital gains relief for it, until I realised that the whole operation was beyond the scope of corporation tax……being that they were based for tax and other purposes underseas and all that! 🙂
November 12, 2015 at 5:17 pm
I suppose that it’s on your mantle piece so that it’s handy for when you need to ream out the chimney stack. Being French it is presumably familiar with the French exclamation “Soot alors!”
November 1, 2015 at 4:51 pm
Good evening Mike, I am
Struggling as to why we add the £400K + £350K of costs together and multiply them by the competition amount, 60%. Is this because this would result in a loss and the estimated costs in total forecast a profit?
I have looked through my workings and its period
Specific 100% PLUS the contract percentage of the remaining costs…. My only logic is that it’s because that way would create a loss?
Appreciate your help and
guidance as always!
November 1, 2015 at 5:30 pm
On the previous page in the notes – towards the top I seem to remember – it says that where a loss is forecast, this should be recognised in full.
So, if you see that a loss is forecast overall, put the full loss figure in as line 3 in working 1
You already have line 1, revenue, so that now means that you can put in “costs recognised” as the balancing figure
October 17, 2015 at 10:28 am
I am stuck on chapter 13-Construction Contracts Example 5
Sir how do you get the cost recognised of 510,000 for year 2.
October 17, 2015 at 10:39 am
Year 2 there’s a forecast loss to be recognised so, as I said in the lecture, where a loss is to be recognised, the second figure to put into working 1 is the loss. The balancing figure then is the figure for costs to be recognised
Does that do it for you?
If not, post again
August 30, 2015 at 1:25 am
It seems that Construction Contracts are not found in the latest f7 study guide downloaded from accaglobal.com
am I right? please check it
August 30, 2015 at 8:14 am
You’re almost correct! IAS 11 no longer exists so that explains why it’s excluded from the study guide / syllabus. The same comment applies to IAS 18
But there is an addition to the syllabus in the form of IFRS 15 and that is a replacement of both IAS 11 and IAS 18
So you still should know how to calculate profits from construction contracts. IFRS 15 now identifies how these profits are to be allocated across the life of the contract, particularly where there is a continuing service agreement element within the contract
August 30, 2015 at 10:31 am
August 30, 2015 at 5:19 pm
You’re welcome (this would have been better posted on the Ask the Tutor page)
October 2, 2015 at 3:29 am
i wish MIKE u can make some notes on ifrs15 that will be kind of you
October 2, 2015 at 7:52 am
There ARE notes on IFRS 15 within the course notes. There’s no recorded lecture, but the notes are there for you
May 15, 2015 at 8:07 am
I am a bit stuck with an example from BPP revision kit – question 52 (preparation question: contract). The year start on Jan 1 and end on Dec 31. Most of the contracts in this question start during the year. I thought that revenue and costs should be calculated with the percentage of completion, but also the number of months. They say in the question that profit accrues evenly over the contract.
E.g. revenue for a contract of 120,000 $ started on July 01 and with completion percentage of 45 % would be: 120,000 $ x 45 % x 6 month
However, they take the full revenue in the solution: 120,000 $ x 45 %.
What is correct and why should we take the full revenue if the contract started mid-year?
May 15, 2015 at 8:18 am
It’s 45% complete – it’s not 45% complete for half a year
How can you time apportion 45% complete? That’s illogical
If you start a project on 1 October and finish it on 31 December, does that mean you should time apportion it by multiplying by 3 months / 12 months?
September 23, 2014 at 10:29 pm
What happened to the boring machines used to build the Chunnel?
In late 1990, the service tunnel was almost complete. The moles had approached each other closer to the British end. France, however, didn’t gloat in its accomplishments. Both countries had come together for a common good. This isn’t to say that some friendly competition hadn’t fueled the tunnel’s construction. When the two tunnel boring machines were about 50 meters from each other, the English moles drove off-line to the right into the narrow gap between the service tunnel and the running tunnel south (Fetherston, p. 342). The British machine stopped once it lay parallel and head to tail with the French machine. The English mole was stripped of anything salvageable. It was then entombed within concrete. The French tunneling machine than was hollowed out. Its outer shell would serve as the tunnel lining. Two workers, one from each side, were chosen at random to be the first to cross over from their respective tunnels and into the other. On December 1, 1990, British construction worker Graham Fagg and his French counterpart, Philippe Cozette, each with an air spade, drilled through the final piece of rock which stood between them (See Appendix C). Once the hole grew big enough, Cozette poked his head through to a frenzy of photographers, reporters, and a small handful of privileged spectators. Fagg repeated Cozette’s actions to the French side. News soon spread across the world. The United Kingdom and France were now linked for the first time in 8,000 years (Guterl, p. 25). This gala event had come at the objection of TML. They felt as though the tunnel was already over budget, and the last thing Eurotunnel needed to do was celebrate. This single event, however, did appease skeptical investors in the project.
I just wanted to find out what happened to the machines lol! This is what i found on the web.
September 24, 2014 at 6:29 am
Being English, I prefer the story that says the French machine was buried!
I still don’t understand why the British machine could not come back in line and exit into France (or even dig a U turn and come back to England)
August 24, 2014 at 3:58 pm
I have a small confusion about when to start charging the depreciation? Its a June 2013 Dipifr question:
The question says:
Construction work commenced on 1 November 2012. The factory was completed on 31 May 2013 and production began on 1 August 2013. The overall useful life of the factory building was estimated at 40 years from the date of completion. Year ends on 30 Sept 2013.
And the Total depreciable amount came out to be $ 10,000
In the solutions, they have charged it for 4 months ( I think its 1st June to 30 Sept 2013)
But shouldn’t it be charged when the ‘production’ has begun i.e from 1st August 2013 (means 2 months?). Doesnt it mean it was ready for use from 1st August 2013?
August 24, 2014 at 6:05 pm
I presume the cost of the factory was $1,200,000 – you never said!
From the information you have given I can understand why you would wish to depreciate for only 2 months. That COULD be acceptable if you were to charge 2 months out of a remaining useful life of 39 years 10 months
The factory is complete as at the end of May and from that time it has “a useful life of 40 years”. The question does NOT say that it has “a useful productive life of 40 years”
Nasty trick 🙁
August 24, 2014 at 7:31 pm
Ahh okay.. i understood.. Thanks!
And by writing ‘Total depreciable amount came out to be $ 10,000’, i meant that the total factory cost worked out to be 10,000 on which depreciation was charged in the solutions.. Well, i understood how they got this ‘10,000’ 🙂
So, thanks once again!
August 24, 2014 at 7:36 pm
May 8, 2014 at 12:58 am
I’m finding it difficult to watch F7 lectures on my tablet, it is displaying Error loading skin: Error loading file for the past 2 days. I’ve watched open tuition lectures from my tablet in the past. So I don’t know what’s happen now. Can you please help me out
August 30, 2014 at 12:41 pm
I am experiencing the same issue! Did you manage to solve this issue or get an help on this??
Really appreciate your help.
August 30, 2014 at 12:43 pm
Alie, have you tried the support page? “Technical support”?
October 1, 2014 at 7:12 am
Dear Alie, I was later able to watch the lectures. I downloaded VLC on my tablet and that did it.
Why is your picture not showing on open tuition. Try and put one.
March 31, 2014 at 8:30 am
how did you come up with the percentages completed in both year 1 and 2, that is the 12%,35%,52%….?
August 15, 2014 at 4:21 am
I think these are assumed percentages to make example clear.
August 15, 2014 at 6:56 am
That’s correct. In fact, in the lecture I know that I say something like “What if it’s 12% complete or 35%?” et cetera
January 29, 2014 at 3:05 pm
Thanks Mr Mike
Please what is mean amount invoiced ? it is amount of contract? and what different between amount due from customer in W1 and W2?
thanks in lecture two
January 30, 2014 at 1:56 pm
Hi Tarek – I’m sure that this is explained in the lecture! However ……. “amount invoiced” is the amount which the builder has received together with those amounts which the builder has invoiced but has not yet received (ie still included in “receivables””
“Amounts due from customers” in W2 is another way of saying “Unbilled work in progress” whereas “Amounts due from customers” in W3 is another way of describing “Accounts receivable”
The two amounts described as “Amounts due from customers” are therefore different in nature – the first is work-in-progress / stock / inventory whilst the second is receivables
January 30, 2014 at 3:20 pm
yes ok thanks mr mikle
please mr mikle i want you advise me what i use in my rivision kit in f7 that meet our method in opentuition kaplan or bpp ?
December 12, 2013 at 9:20 am
Hi Mr Mike
Where i will find construction contracts and lease and Restructuring issues & Contingent liabilities and inventories in exam is it in Q1 or Q2 or Q3 ?
December 12, 2013 at 7:12 pm
In any of those … and why have you missed off questions 4 and 5?
Any of those topics could be involved in any of the five questions
Sorry, but there’s no short cut to passing these exams – just ask some of the students who finished their exam session last Wednesday
December 3, 2013 at 7:28 am
I have a school exam on the day of the ACCA exam, if i decide not to write the exam, would ACCA keep a spot for the june 2014 due to the fact that i paid for a sit in this december exam?
December 3, 2013 at 8:59 am
No, sorry, that would be MOST unlikely.
June 2, 2013 at 11:38 pm
Three days before the exam and I’m Googling the history of the channel tunnel! doh!
May 27, 2013 at 11:21 pm
Really so helpful resources.
March 8, 2013 at 1:00 pm
HI Admin, please can you download the lectures on your electronic device like your iphone or Ipod so that you can listen to it on the go.
March 8, 2013 at 2:05 pm
you can listen on the go on your iPhone
lectures work on 3G
and are not downloadable
March 20, 2013 at 2:19 pm
Thanks for the reply..
November 21, 2012 at 3:11 pm
November 13, 2012 at 8:33 am
I really respect this lecturer. Thanks A Lot Open tuition for providing us these great lectures. Thanks Again
October 19, 2012 at 5:47 am
Great lecture and great lecturer!
October 5, 2012 at 5:15 pm
Hi, this is relating to the example 1 Tomas and Iveta.
In it 300k is earned if 60% of the work is completed by the end of year 2.
In part (a) one outcome is 63%. So Tomas can get the 300k extra in the first year. But in the second year ( part b) the stage of completion is 68%. But in the solution 300k is again added. Isn’t the 300k an oneoff payment? Isn’t recognising 300k again, is exagerating revenue?
October 5, 2012 at 7:18 pm
I seem to remember that the revenue figure is intended to be the cumulative amount to be recognised. To arrive at the figure for revenue for the second year, you need to take the accumulated figure for the end of year two and deduct from that the figure as at the end of year one.
In that way, you’ll see that the 300,000 is included in only one Statement of Income
October 5, 2012 at 7:19 pm
@dimuthu1234, If you had read the previous post immediately below this reply, you would have seen the answer for yourself!
August 27, 2012 at 3:09 pm
sir why we take 100% of 300000 because it is for year2
August 27, 2012 at 5:41 pm
@acuteacca, which example?
August 27, 2012 at 7:28 pm
@MikeLittle, Is this the question involving Tomas and Ivets? The $300,000 on that question is the agreed element of the contract in the situation that the contract was at least 60% complete by the end of year two. In that part of the answer, it starts with the assumption that the contract was 65% complete.
However, it must be remembered that both revenue and costs at the end of year two are cumulative and, for the purposes of the Statement of Income, both those line items need to be reduced by the amount recognised in year 1. Thus, if the revenue to be recognised by the end of year 2 were ( 65% * 1,000,000 ) + 100% * $300,000 bonus … so $950,000, and suppose the revenue recognised in year 1 Statement of Income had been $270,000, the revenue to be recognised in year 2 is $950,000 – $270,000 = $680,000
August 29, 2012 at 3:54 am
@MikeLittle, Thanks ….
September 26, 2013 at 8:44 pm
oh ok, thanks
August 27, 2012 at 2:28 pm
lectures are not working why you are using a video hosting server simply host file in root directory of server we are facing problems in lectures please do something admin……………………….
August 27, 2012 at 2:43 pm
@acuteacca, Lectures are working fine
check your PC/ internet etc.
August 27, 2012 at 3:35 pm
August 27, 2012 at 1:07 pm
sir please explain the straddle………………………………….
August 27, 2012 at 5:45 pm
@acuteacca, what straddle?
August 27, 2012 at 6:38 pm
@MikeLittle, ok, “to straddle” has a number of dictionary definitions included amongst which are these two:-
a) to stand, walk or sit with the legs apart
b) to spread the legs apart
Right – hold that image in your mind. In the context of a contract which “straddles” two or more accounting periods, the verb suggests that some part ( may be, or may be not, a half ) lies within one accounting period and the rest ( or part of the rest ) lies within subsequent accounting periods.
Does that answer your straddle query?
May 31, 2012 at 10:36 am
May 25, 2012 at 2:13 pm
Very helpful. I hope this site is around for a long time.
May 17, 2012 at 8:33 am
this is amazing! keep it up good people!
May 12, 2012 at 9:04 pm
April 10, 2012 at 8:02 am
lectures are quite good, is it possible to download these video lectures
August 27, 2012 at 12:41 pm
@dmapiye, sorry these lectures are available online only
April 9, 2012 at 8:46 am
Very helpful, great!
April 5, 2012 at 11:03 am
well explained. thanks so much!
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