Unit 6 - Construction - Unit 6 Unit Construction...

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Unit 6 Unit 6 Construction Contracts (HKAS 11)
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2 Construction Contracts Construction Contracts HKAS 11 HKAS 11 Part I Introduction
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3 Construction Contracts Construction Contracts HKAS 11 HKAS 11 HKAS 11 applies in accounting for construction contracts in the financial  statements of  contractors.  Usually, it may last for more than one accounting  Usually, it may last for more than one accounting  period. period. Construction Contract -- 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 -- include (a) contracts for the rendering of services which are  directly related to the construction of the asset e.g.  services contracts of project managers and architects (b) contracts for the destruction or restoration of assets, and  the restoration of the environment following the demolition  of assets    Examples highway, bridge, tunnel, dam, pipeline,  building, ship, airport, sports stadium e.g. Bird Nest, Water Cube
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4 Special Features of Construction Contracts Special Features of Construction Contracts Progress billings : Progress billings :   construction bills are normally issued  progressively while the asset is under construction, and  sometimes  on presentation of an architect’s certificate. on presentation of an architect’s certificate. Retention : Retention :  the  the amounts of progress billings which are not  paid until the satisfaction of conditions specified in the  construction contract for the payment of such amounts or   defects have been rectified. It acts as  a guarantee for sub-  a guarantee for sub- standard work  standard work (equal to progress billings less progress  payment received) Claims :  the amount that the contract seeks to collect from  the client or another party as reimbursement for costs not  included in the contract price  e.g. customer caused delays,  errors in specifications or design, disputed variations in  contract work
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Special Features of Construction Contracts Special Features of Construction Contracts Advance :  Advance :  amounts received by the contractor before the  amounts received by the contractor before the  related work is performed related work is performed Incentive Payment :  bonus for early completion of the  contract Penalty :  for not meeting the time or quality specified in  the contract Cost to Date :  total costs incurred from the beginning of  the contract up to the reporting date Contract Revenue Contract Cost 5
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6 Example Example Progress Billing
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Unit 6 - Construction - Unit 6 Unit Construction...

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