Reference no: EM132645699
Compare the construction contracts policy of Decmil Group Ltd with NRW's construction contract policy, discuss the difference and what factors may cause the difference, and evaluate the quality of disclosure for both companies.
Decmil Group Ltd construction contracts policy:
Construction work in progress is valued at cost, plus profit recognised to date less any provision for anticipated future losses. Cost includes both variable and fixed costs relating to specific contracts, and those costs that are attributable to the contract activity in general and that can be allocated on a reasonable basis. Construction profits are recognised on the stage of completion basis and measured using the proportion of costs incurred to date compared to expected actual costs. Where losses are anticipated they are provided for in full. Construction revenue has been recognised on the basis of the terms of the contract adjusted for any variations or claims allowable under the contract.
NRW construction contract policy:
The Group derives revenue from the construction and delivery of resource projects and public sector infrastructure projects across Australia. The performance obligation is usually the entire project, as provided for in the contract, given that the different services are highly interdependent and integrated and are aimed at transferring the project to the customer as a whole, representing the combined output for which the customer has contracted. Revenue is recognised over time as an asset is created by the group that the customer controls. In cases where the Group does not form an asset with an alternative use other than sale to the customer, and where the Group has the right to collect the consideration for the services over the contract term.
Revenue is calculated based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs. The Group considers that this input method (e.g. costs incurred) is an appropriate measure of the progress towards completion of the contractual performance obligations under AASB 15.