AS 7 - 108 Accounting Standard (AS) 7 (revised 2002)...

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108 Accounting Standard (AS) 7 (revised 2002) Construction Contracts Contents OBJECTIVE SCOPE Paragraph 1 DEFINITIONS 2-5 COMBINING AND SEGMENTING CONSTRUCTION CONTRACTS 6-9 CONTRACT REVENUE 10-14 CONTRACT COSTS 15-20 RECOGNITION OF CONTRACT REVENUE AND EXPENSES 21-34 RECOGNITION OF EXPECTED LOSSES 35-36 CHANGES IN ESTIMATES 37 DISCLOSURE 38-44 APPENDIX The following Accounting Standards Interpretation (ASI) relates to AS 7 (revised 2002) ASI 29 Turnover in case of Contractors The above Interpretation is published elsewhere in this Compendium.
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Accounting Standard (AS) 7* (revised 2002) ConstructionContracts (This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective and the Preface to the Statements of Accounting Standards 1 .) Accounting Standard (AS) 7, Construction Contracts (revised 2002), issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of all contracts entered into during accounting periods commencing on or after 1-4-2003 and is mandatory in nature 2 from that date. Accordingly, Accounting Standard (AS) 7, ‘Accountin g for Construction Contracts’ , issued by the Institute in December 1983, is not applicable in respect of such contracts. Early application of this Standard is, however, encouraged. The following is the text of the revised Accounting Standard. Objective The objective of this Statement is to prescribe the accounting treatment of revenue and costs associated with construction contracts. Because of the nature of the activity undertaken in construction contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different accounting periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the accounting periods in which construction work is * Originally issued in December 1983 and titled as ‘Accountin g for Construction Contracts’. 1 Attention is specifically drawn to paragraph 4.3 of the Preface, according to which Accounting Standards are intended to apply only to items which are material. 2 Reference may be made to the section titled ‘Announcement s of the Council regarding status of various documents issued by the Institute of Chartered Accountants of India’ appearing at the beginning of this Compendium for a detailed discussion on the implications of the mandatory status of an accounting standard.
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110 AS 7 (revised 2002) performed. This Statement uses the recognition criteria established in the Framework for the Preparation and Presentation of Financial Statements to determine when contract revenue and contract costs should be recognised as revenue and expenses in the statement of profit and loss. It also provides practical guidance on the application of these criteria. Scope
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This note was uploaded on 12/07/2011 for the course MBA 0001 taught by Professor Akshat during the Spring '09 term at Institute of Management Technology.

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AS 7 - 108 Accounting Standard (AS) 7 (revised 2002)...

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