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    Module 3 - Construction Contracts

    Uploaded by

    Potato Commissioner
    This document provides an overview of Module 3 on accounting for construction contracts. It begins with an introduction explaining the increased prevalence of construction contracts in the Philippine economy and the need for accountants to properly account for them under the new PFRS 15 standard. The learning outcomes cover applying the principles of PFRS 15 to construction contract revenues and costs, accounting for onerous contracts, and contract modifications. The activities and resources section outlines self-directed learning through reading concepts and answering exercises in the textbook, with weekly meetings for consultation. Topic areas include principles of PFRS 15, measuring contract progress, presentation, variable consideration, and contract modifications. Formative and summative assessments are provided to test comprehension.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Module 3 - Construction Contracts

    Uploaded by

    Potato Commissioner
    60 views6 pages
    This document provides an overview of Module 3 on accounting for construction contracts. It begins with an introduction explaining the increased prevalence of construction contracts in the Philippine economy and the need for accountants to properly account for them under the new PFRS 15 standard. The learning outcomes cover applying the principles of PFRS 15 to construction contract revenues and costs, accounting for onerous contracts, and contract modifications. The activities and resources section outlines self-directed learning through reading concepts and answering exercises in the textbook, with weekly meetings for consultation. Topic areas include principles of PFRS 15, measuring contract progress, presentation, variable consideration, and contract modifications. Formative and summative assessments are provided to test comprehension.

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    This document provides an overview of Module 3 on accounting for construction contracts. It begins with an introduction explaining the increased prevalence of construction contracts in the Philippine economy and the need for accountants to properly account for them under the new PFRS 15 standard. The learning outcomes cover applying the principles of PFRS 15 to construction contract revenues and costs, accounting for onerous contracts, and contract modifications. The activities and resources section outlines self-directed learning through reading concepts and answering exercises in the textbook, with weekly meetings for consultation. Topic areas include principles of PFRS 15, measuring contract progress, presentation, variable consideration, and contract modifications. Formative and summative assessments are provided to test comprehension.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    60 views6 pages

    Module 3 - Construction Contracts

    Uploaded by

    Potato Commissioner
    This document provides an overview of Module 3 on accounting for construction contracts. It begins with an introduction explaining the increased prevalence of construction contracts in the Philippine economy and the need for accountants to properly account for them under the new PFRS 15 standard. The learning outcomes cover applying the principles of PFRS 15 to construction contract revenues and costs, accounting for onerous contracts, and contract modifications. The activities and resources section outlines self-directed learning through reading concepts and answering exercises in the textbook, with weekly meetings for consultation. Topic areas include principles of PFRS 15, measuring contract progress, presentation, variable consideration, and contract modifications. Formative and summative assessments are provided to test comprehension.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    MODULE 3

    CONSTRUCTION CONTRACTS

    INTRODUCTION
    In this era of “Build, Build, Build” of the Philippine Economy it has been more prevalent that we know how
    to account for construction contracts. There have been a bevy of new construction contracts being bid by
    the Government and with that comes an increase in the number of contractors. As accountants, we must
    learn to properly account for these construction contracts in order to give an accurate story on the
    performance of these construction companies.

    In the past, accountants previously were guided by PAS 11 on how to account for these contracts but this
    has already been superseded by PFRS 15 in order to give a single standard for almost all contracts with
    customers.

    Under this module, one will understand the core principles of the new standard and how it differs albeit
    only slightly from the previous standard and how to account for construction contracts particularly its
    different elements.

    LEARNING OUTCOMES
    At the end of the module, you should be able to:
    1. Apply the principles under PFRS 15 to account for revenues from construction contracts.
    2. Account for contract costs.
    3. Account for onerous construction contracts.
    4. Account for variable consideration, contract modifications, and other changes in the
    transaction price of a construction contract.
    5. Account for the uncollectability of contract revenue

    ACTIVITIES AND RESOURCES


    Self-directed and reflective learning characterize this printed modular approach in this subject. You are
    expected to read concepts and answer the exercises in the prescribed textbook. You will also encounter
    reflective exercise and we will have weekly wrap-up and consultation meetings to strengthen your
    knowledge and skills acquired from reading and doing learning activities. You will submit your outputs at
    designated pick-up points or using the communication channels available to you on a specified date and
    time.

    Accounting for Special Transactions


    24
    TOPIC 3.1 PRINCIPLES OF PFRS 15
    In this topic, you will learn about the basic principles of PFRS 15 as it relates to construction contracts.

    What constitutes a construction contract? How will you apply the basic principles of PFRS 15? When will
    construction revenue be recognized?

    Find out the answers to those questions by doing the learning activities below.

    LEARNING ACTIVITY 3.1

    Concept-building
    Read the concepts and study the illustrative cases on PFRS 15 as it applies to construction
    contracts on pages 248-261 of your textbook.

    TOPIC 3.2 METHODS OF MEASURING PROGRESS


    One important step in accounting for revenue from construction contracts is measuring the progress on
    a particular project.

    Refer to the learning activities 3.2 to 3.3.2 to understand this concept.

    LEARNING ACTIVITY 3.2

    Concept-building
    Read the concepts on measuring progress on pages 261-267 of your textbook.

    TOPIC 3.3 CONTRACT COSTS


    It is important to know which costs are included as contract costs as it is an essential element in measuring
    the percentage of completion of a contract especially that the most common method of measuring
    progress is the cost-to-cost method.

    LEARNING ACTIVITY 3.3.1

    Concept-building
    Read the concepts and study the illustrative cases on contract costs on pages 267-271 of your
    textbook.

    Accounting for Special Transactions


    25
    LEARNING ACTIVITY 3.3.2

    Concept-building
    Read the concepts and study the illustrative cases on adjustments to the measure of progress
    on pages 271-274 of your textbook.

    TOPIC 3.4 PRESENTATION


    After knowing the percentage of completion, contract costs and the amount of revenue you will recognize,
    it is important that as accountants we know which items will be presented, the amount to be recognized
    and how to properly present these in the financial statements since our jobs does not end with just
    recognizing these items in our journals and worksheets but to let the readers understand and derive sound
    decisions from the financial statements.

    LEARNING ACTIVITY 3.4.1

    Concept-building
    Read the concepts and study the illustrative cases on presentation and comprehensive
    problems on construction contracts on pages 274-295 of your textbook.

    LEARNING ACTIVITY 3.4.2

    Concept-review
    To validate your understanding of the concepts learned from reading activity, answer the
    following:
    True or False on page 332
    Multiple-choice Theory on pages 333-336

    Concept-Application
    Solve problem on pages 336-337

    Accounting for Special Transactions


    26
    TOPIC 3.5 VARIABLE CONSIDERATION
    Now that you know the basics on how to account for construction contracts. You will now learn about
    some specific provisions in the contract that might affect how we account for the construction contract.
    One of such is when there are variable considerations.

    LEARNING ACTIVITY 3.5

    Concept-building
    Read the concepts and study the illustrative cases on variable consideration on pages 295-302
    of your textbook.

    TOPIC 3.6 CONTRACT MODIFICATION


    A contract modification is a change in the scope and/or price of a contract that is approved by the
    contracting parties and this will affect the accounting for the construction contract moving forward. Due
    to a contract modification there may be a change in the transaction price

    LEARNING ACTIVITY 3.6

    Concept-building
    Read the concepts and study the illustrative cases on contract modification changes in the
    transaction price on pages 302-312 of your textbook.

    TOPIC 3.7 UNCERTAINTY IN THE COLLECTABILITY OF CONTRACT REVENUE

    LEARNING ACTIVITY 3.7

    Concept-building
    Read the concepts and study the illustrative cases on Uncertainty in the collectability of
    contract revenue on pages 312-315 of your textbook.

    Accounting for Special Transactions


    27
    LEARNING ACTIVITY 3.8.1

    Concept-building
    In order to fully master the topic on Construction Contracts read the additional illustrations on
    pages 315-330 of your textbook.

    LEARNING ACTIVITY 3.8.2

    Concept-Application
    Solve Multiple Choice - Problem on pages 337-343 of your textbook.

    ASSESSMENT
    Formative assessments are non-graded assessments but aim to validate the concepts learned from
    reading activity. This is important for you to have a strong foundation and knowledge in this course. Your
    textbook provides an opportunity for you to review and apply the concepts. So make the most of this
    module, your textbook and most importantly your time. Answer as many as you can the exercises and
    problems in your textbook.

    Summative assessments form part of your final grade in this course. In this module, these are your quizzes
    and submissions of the following:
    at least 10 answered items from the concept-review
    at least 10 answered items from concept-application (show your solutions)

    Submissions of more than the minimum numbers will be given extra points.

    Major exams are likewise graded. Place and time will be announced.

    Accounting for Special Transactions


    28
    WRAP-UP AND CONSULTATION

    Before this session, answer the following questions:

    What you have learned the most in this module?


    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    _____
    What topics need further discussions?
    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    ______________________________________________________________________
    _____

    KEY TAKEAWAYS
    For mastery of key concepts on intercompany transactions, read chapter summary on page 331 of your
    textbook.

    REFERENCE
    Millan, Z. (2020). Accounting for special transactions (advanced accounting 1). Bandolin
    Enterprise

    Accounting for Special Transactions


    29

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