{"id":"F2005B01566","name":"AASB 111 - Construction Contracts - July 2004","slug":"aasb-111-construction-contracts-july-2004","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"repealed","isInForce":false,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":112010,"registerId":"commonwealth-F2005B01566-current","compilationNumber":null,"startDate":"2026-04-03","status":"Repealed","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Obtaining Copies of Accounting Standards","sectionType":"part","heading":"Obtaining Copies of Accounting Standards","content":"## Obtaining Copies of Accounting Standards\n\nCompiled versions of Standards, original Standards and amending Standards (see Compilation Details) are available on the AASB website: www.aasb.gov.au.\n\nPrinted copies of original Standards and amending Standards are available for purchase by contacting:\n\n| The Customer Service OfficerAustralian Accounting Standards BoardLevel 7600 Bourke StreetMelbourne VictoriaAUSTRALIA | Postal address:PO Box 204Collins Street West Victoria 8007AUSTRALIA |\n| -------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- |\n| Phone: (03) 9617 7637Fax: (03) 9617 7608E-mail: publications@aasb.gov.auWebsite: www.aasb.gov.au                     |                                                                     |","sortOrder":0},{"sectionNumber":"Other Enquiries","sectionType":"part","heading":"Other Enquiries","content":"## Other Enquiries\n\nPhone: (03) 9617 7600\n\nFax: (03) 9617 7608\n\nE-mail: standard@aasb.gov.au\n\nCOPYRIGHT\n\n© 2015 Commonwealth of Australia\n\nThis compiled AASB Standard contains IFRS Foundation copyright material. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to The Director of Finance and Administration, Australian Accounting Standards Board, PO Box 204, Collins Street West, Victoria 8007.\n\nAll existing rights in this material are reserved outside Australia.\n\nReproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for authorisation to reproduce for commercial purposes outside Australia should be addressed to the IFRS Foundation at www.ifrs.org.","sortOrder":1},{"sectionNumber":"CONTENTS","sectionType":"part","heading":"CONTENTS","content":"# CONTENTS\n\nCOMPILATION DETAILS\n\nComparison With IAS 11\n\nAccounting Standard\n\nAASB 111 Construction Contracts\n\nParagraphs\n\nObjective\n\nApplication Aus1.1 – Aus1.7\n\nReduced Disclosure Requirements Aus1.8 – Aus1.9\n\nScope 1\n\nDefinitions 3 – 6\n\nCombining and Segmenting Construction Contracts 7 – 10\n\nContract Revenue 11 – 15\n\nContract Costs 16 – 21\n\nRecognition of Contract Revenue and Expenses 22 – 35\n\nRecognition of Expected Losses 36 – 37\n\nChanges in Estimates 38\n\nDisclosure 39 – 45\n\nAustralian Guidance Page 13\n\nDELETED IAS 11 TEXT Page 14\n\nAPPENDIX: ILLUSTRATIVE EXAMPLES FOR IAS 11  \n(available on the AASB website)\n\nAustralian Accounting Standard AASB 111 Construction Contracts (as amended) is set out in paragraphs Aus1.1 – 45. All the paragraphs have equal authority. Terms defined in this Standard are in italics the first time they appear in the Standard. AASB 111 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation of Standards, which identifies the UIG Interpretations. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.","sortOrder":2},{"sectionNumber":"compilation details","sectionType":"part","heading":"compilation details","content":"# compilation details\n\n## Accounting Standard AASB 111 Construction Contracts as amended\n\nThis compiled Standard applies to annual reporting periods beginning on or after 1 July 2015. It takes into account amendments up to and including 28 January 2015 and was prepared on 2 April 2015 by the staff of the Australian Accounting Standards Board (AASB).\n\nThis compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 111 (July 2004) as amended by other Accounting Standards, which are listed in the Table below.\n\n### Table of Standards\n\n| Standard     | Date made   | Application date(annual reporting periods … on or after …) | Application, saving or transitional provisions |\n| ------------ | ----------- | ---------------------------------------------------------- | ---------------------------------------------- |\n| AASB 111     | 15 Jul 2004 | (beginning) 1 Jan 2005                                     |                                                |\n| AASB 2007-6  | 14 Jun 2007 | (beginning) 1 Jan 2009                                     | see (a) below                                  |\n| AASB 2007-8  | 24 Sep 2007 | (beginning) 1 Jan 2009                                     | see (b) below                                  |\n| AASB 2007-10 | 13 Dec 2007 | (beginning) 1 Jan 2009                                     | see (b) below                                  |\n| AASB 2009-1  | 22 Apr 2009 | (beginning) 1 Jan 2009and (ending) 30 Apr 2009             | see (c) below                                  |\n| AASB 2009-6  | 25 Jun 2009 | (beginning) 1 Jan 2009and (ending) 30 Jun 2009             | see (d) below                                  |\n| AASB 2010-2  | 30 Jun 2010 | (beginning) 1 Jul 2013                                     | see (e) below                                  |\n| AASB 2015-3  | 28 Jan 2015 | (beginning) 1 Jul 2015                                     | see (f) below                                  |\n\n(a) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 123 Borrowing Costs (June 2007) is also applied to such periods.\n\n(b) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods.\n\n(c) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2009 that end before 30 April 2009, provided that AASB 123 Borrowing Costs (June 2007) is also applied to such periods.\n\n(d) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods, and to annual reporting periods beginning on or after 1 January 2009 that end before 30 June 2009.\n\n(e) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013, provided that AASB 1053 Application of Tiers of Australian Accounting Standards is also applied to such periods.\n\n(f) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2014 but before 1 July 2015.\n\n### Table of Amendments\n\n| Paragraph affected                    | How affected   | By … [paragraph]                    |\n| ------------------------------------- | -------------- | ----------------------------------- |\n| Objective                             | amended        | AASB 2007-8 [6]                     |\n| Aus1.1                                | amended        | AASB 2007-8 [7, 8]                  |\n| Aus1.4                                | amendeddeleted | AASB 2007-8 [8]AASB 2015-3 [13, 14] |\n| Aus1.8-Aus1.9 (and preceding heading) | added          | AASB 2010-2 [29]                    |\n| 1                                     | amended        | AASB 2007-10 [55]                   |\n| 18                                    | amended        | AASB 2007-6 [13]                    |\n| Aus18.1                               | added          | AASB 2009-1 [6]                     |\n| 22-23                                 | amended        | AASB 2007-8 [6]                     |\n| 26                                    | amended        | AASB 2007-8 [44]                    |\n| 28                                    | amendedamended | AASB 2007-8 [44]AASB 2009-6 [39]    |\n| 38                                    | amended        | AASB 2007-8 [44]                    |\n| 40                                    | amended        | AASB 2007-8 [6]                     |","sortOrder":3},{"sectionNumber":"Accounting Standard AASB 111 Constructio","sectionType":"part","heading":"Accounting Standard AASB 111 Construction Contracts as amended","content":"## Accounting Standard AASB 111 Construction Contracts as amended\n\nThis compiled Standard applies to annual reporting periods beginning on or after 1 July 2015. It takes into account amendments up to and including 28 January 2015 and was prepared on 2 April 2015 by the staff of the Australian Accounting Standards Board (AASB).\n\nThis compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 111 (July 2004) as amended by other Accounting Standards, which are listed in the Table below.","sortOrder":4},{"sectionNumber":"Table of Standards","sectionType":"division","heading":"Table of Standards","content":"### Table of Standards\n\n| Standard     | Date made   | Application date(annual reporting periods … on or after …) | Application, saving or transitional provisions |\n| ------------ | ----------- | ---------------------------------------------------------- | ---------------------------------------------- |\n| AASB 111     | 15 Jul 2004 | (beginning) 1 Jan 2005                                     |                                                |\n| AASB 2007-6  | 14 Jun 2007 | (beginning) 1 Jan 2009                                     | see (a) below                                  |\n| AASB 2007-8  | 24 Sep 2007 | (beginning) 1 Jan 2009                                     | see (b) below                                  |\n| AASB 2007-10 | 13 Dec 2007 | (beginning) 1 Jan 2009                                     | see (b) below                                  |\n| AASB 2009-1  | 22 Apr 2009 | (beginning) 1 Jan 2009and (ending) 30 Apr 2009             | see (c) below                                  |\n| AASB 2009-6  | 25 Jun 2009 | (beginning) 1 Jan 2009and (ending) 30 Jun 2009             | see (d) below                                  |\n| AASB 2010-2  | 30 Jun 2010 | (beginning) 1 Jul 2013                                     | see (e) below                                  |\n| AASB 2015-3  | 28 Jan 2015 | (beginning) 1 Jul 2015                                     | see (f) below                                  |\n\n(a) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 123 Borrowing Costs (June 2007) is also applied to such periods.\n\n(b) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods.\n\n(c) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2009 that end before 30 April 2009, provided that AASB 123 Borrowing Costs (June 2007) is also applied to such periods.\n\n(d) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that AASB 101 Presentation of Financial Statements (September 2007) is also applied to such periods, and to annual reporting periods beginning on or after 1 January 2009 that end before 30 June 2009.\n\n(e) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013, provided that AASB 1053 Application of Tiers of Australian Accounting Standards is also applied to such periods.\n\n(f) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2014 but before 1 July 2015.","sortOrder":5},{"sectionNumber":"Table of Amendments","sectionType":"division","heading":"Table of Amendments","content":"### Table of Amendments\n\n| Paragraph affected                    | How affected   | By … [paragraph]                    |\n| ------------------------------------- | -------------- | ----------------------------------- |\n| Objective                             | amended        | AASB 2007-8 [6]                     |\n| Aus1.1                                | amended        | AASB 2007-8 [7, 8]                  |\n| Aus1.4                                | amendeddeleted | AASB 2007-8 [8]AASB 2015-3 [13, 14] |\n| Aus1.8-Aus1.9 (and preceding heading) | added          | AASB 2010-2 [29]                    |\n| 1                                     | amended        | AASB 2007-10 [55]                   |\n| 18                                    | amended        | AASB 2007-6 [13]                    |\n| Aus18.1                               | added          | AASB 2009-1 [6]                     |\n| 22-23                                 | amended        | AASB 2007-8 [6]                     |\n| 26                                    | amended        | AASB 2007-8 [44]                    |\n| 28                                    | amendedamended | AASB 2007-8 [44]AASB 2009-6 [39]    |\n| 38                                    | amended        | AASB 2007-8 [44]                    |\n| 40                                    | amended        | AASB 2007-8 [6]                     |","sortOrder":6},{"sectionNumber":"Comparison with IAS 11","sectionType":"part","heading":"Comparison with IAS 11","content":"# Comparison with IAS 11\n\n## AASB 111 and IAS 11\n\nAASB 111 Construction Contracts as amended incorporates IAS 11 Construction Contracts as issued and amended by the International Accounting Standards Board (IASB). Paragraphs that have been added to this Standard (and do not appear in the text of IAS 11) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering.\n\n### Compliance with IAS 11\n\nEntities that comply with AASB 111 as amended will simultaneously be in compliance with IAS 11 as amended, with the exception of entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements.","sortOrder":7},{"sectionNumber":"AASB 111 and IAS 11","sectionType":"part","heading":"AASB 111 and IAS 11","content":"## AASB 111 and IAS 11\n\nAASB 111 Construction Contracts as amended incorporates IAS 11 Construction Contracts as issued and amended by the International Accounting Standards Board (IASB). Paragraphs that have been added to this Standard (and do not appear in the text of IAS 11) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering.","sortOrder":8},{"sectionNumber":"Compliance with IAS 11","sectionType":"division","heading":"Compliance with IAS 11","content":"### Compliance with IAS 11\n\nEntities that comply with AASB 111 as amended will simultaneously be in compliance with IAS 11 as amended, with the exception of entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements.","sortOrder":9},{"sectionNumber":"aCCOUNTING STANDARD AASB 111","sectionType":"part","heading":"aCCOUNTING STANDARD AASB 111","content":"# aCCOUNTING STANDARD AASB 111\n\nConstruction Contracts","sortOrder":10},{"sectionNumber":"Objective","sectionType":"part","heading":"Objective","content":"## Objective\n\nThe objective of this Standard 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 reporting periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the reporting periods in which construction work is performed. This Standard 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 comprehensive income. It also provides practical guidance on the application of these criteria.","sortOrder":11},{"sectionNumber":"Application","sectionType":"part","heading":"Application","content":"## Application\n\nAus1.1 This Standard applies to:\n\n(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;\n\n(b) general purpose financial statements of each other reporting entity; and\n\n(c) financial statements that are, or are held out to be, general purpose financial statements.\n\nAus1.2 This Standard applies to annual reporting periods beginning on or after 1 January 2005.  \n\\[Note: For application dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]\n\nAus1.3 This Standard shall not be applied to annual reporting periods beginning before 1 January 2005.\n\nAus1.4 \\[Deleted by the AASB\\]\n\nAus1.5 When applicable, this Standard supersedes:\n\n(a) AASB 1009 Construction Contracts as notified in the Commonwealth of Australia Gazette No S 532, 16 December 1997; and\n\n(b) AAS 11 Construction Contracts as issued in December 1997.\n\nAus1.6 Both AASB 1009 and AAS 11 remain applicable until superseded by this Standard.\n\nAus1.7 Notice of this Standard was published in the Commonwealth of Australia Gazette No S 294, 22 July 2004.","sortOrder":12},{"sectionNumber":"Reduced Disclosure Requirements","sectionType":"division","heading":"Reduced Disclosure Requirements","content":"### Reduced Disclosure Requirements\n\nAus1.8 Paragraphs 40, 41 and 45 of this Standard do not apply to entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements. Entities applying Australian Accounting Standards – Reduced Disclosure Requirements may elect to comply with some or all of these excluded requirements.\n\nAus1.9 The requirements that do not apply to entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements are identified in this Standard by shading of the relevant text.","sortOrder":13},{"sectionNumber":"Scope","sectionType":"part","heading":"Scope","content":"## Scope\n\n1 This Standard shall be applied in accounting for construction contracts in the financial statements of contractors.\n\n2 \\[Deleted by the AASB\\]","sortOrder":14},{"sectionNumber":"Definitions","sectionType":"part","heading":"Definitions","content":"## Definitions\n\n3 The following terms are used in this Standard with the meanings specified.\n\nA construction contract is 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.\n\nA cost plus contract is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee.\n\nA fixed price contract is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output, which in some cases is subject to cost escalation clauses.\n\n4 A construction contract may be negotiated for the construction of a single asset such as a bridge, building, dam, pipeline, road, ship or tunnel. A construction contract may also deal with the construction of a number of assets which are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use; examples of such contracts include those for the construction of refineries and other complex pieces of plant or equipment.\n\n5 For the purposes of this Standard, construction contracts include:\n\n(a) contracts for the rendering of services which are directly related to the construction of the asset, for example, those for the services of project managers and architects; and\n\n(b) contracts for the destruction or restoration of assets, and the restoration of the environment following the demolition of assets.\n\n6 Construction contracts are formulated in a number of ways which, for the purposes of this Standard, are classified as fixed price contracts and cost plus contracts. Some construction contracts may contain characteristics of both a fixed price contract and a cost plus contract, for example in the case of a cost plus contract with an agreed maximum price. In such circumstances, a contractor needs to consider all the conditions in paragraphs 23 and 24 in order to determine when to recognise contract revenue and expenses.","sortOrder":15},{"sectionNumber":"Combining and Segmenting Construction Co","sectionType":"part","heading":"Combining and Segmenting Construction Contracts","content":"## Combining and Segmenting Construction Contracts\n\n7 The requirements of this Standard are usually applied separately to each construction contract. However, in certain circumstances, it is necessary to apply the Standard to the separately identifiable components of a single contract or to a group of contracts together in order to reflect the substance of a contract or a group of contracts.\n\n8 When a contract covers a number of assets, the construction of each asset shall be treated as a separate construction contract when:\n\n(a) separate proposals have been submitted for each asset;\n\n(b) each asset has been subject to separate negotiation and the contractor and customer have been able to accept or reject that part of the contract relating to each asset; and\n\n(c) the costs and revenues of each asset can be identified.\n\n9 A group of contracts, whether with a single customer or with several customers, shall be treated as a single construction contract when:\n\n(a) the group of contracts is negotiated as a single package;\n\n(b) the contracts are so closely interrelated that they are, in effect, part of a single project with an overall profit margin; and\n\n(c) the contracts are performed concurrently or in a continuous sequence.\n\n10 A contract may provide for the construction of an additional asset at the option of the customer or may be amended to include the construction of an additional asset. The construction of the additional asset shall be treated as a separate construction contract when:\n\n(a) the asset differs significantly in design, technology or function from the asset or assets covered by the original contract; or\n\n(b) the price of the asset is negotiated without regard to the original contract price.","sortOrder":16},{"sectionNumber":"Contract Revenue","sectionType":"part","heading":"Contract Revenue","content":"## Contract Revenue\n\n11 Contract revenue shall comprise:\n\n(a) the initial amount of revenue agreed in the contract; and\n\n(b) variations in contract work, claims and incentive payments:\n\n(i) to the extent that it is probable that they will result in revenue; and\n\n(ii) they are capable of being reliably measured.\n\n12 Contract revenue is measured at the fair value of the consideration received or receivable. The measurement of contract revenue is affected by a variety of uncertainties that depend on the outcome of future events. The estimates often need to be revised as events occur and uncertainties are resolved. Therefore, the amount of contract revenue may increase or decrease from one period to the next. For example:\n\n(a) a contractor and a customer may agree variations or claims that increase or decrease contract revenue in a period subsequent to that in which the contract was initially agreed;\n\n(b) the amount of revenue agreed in a fixed price contract may increase as a result of cost escalation clauses;\n\n(c) the amount of contract revenue may decrease as a result of penalties arising from delays caused by the contractor in the completion of the contract; or\n\n(d) when a fixed price contract involves a fixed price per unit of output, contract revenue increases as the number of units is increased.\n\n13 A variation is an instruction by the customer for a change in the scope of the work to be performed under the contract. A variation may lead to an increase or a decrease in contract revenue. Examples of variations are changes in the specifications or design of the asset and changes in the duration of the contract. A variation is included in contract revenue when:\n\n(a) it is probable that the customer will approve the variation and the amount of revenue arising from the variation; and\n\n(b) the amount of revenue can be reliably measured.\n\n14 A claim is an amount that the contractor seeks to collect from the customer or another party as reimbursement for costs not included in the contract price. A claim may arise from, for example, customer caused delays, errors in specifications or design, and disputed variations in contract work. The measurement of the amounts of revenue arising from claims is subject to a high level of uncertainty and often depends on the outcome of negotiations. Therefore, claims are included in contract revenue only when:\n\n(a) negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and\n\n(b) the amount that it is probable will be accepted by the customer can be measured reliably.\n\n15 Incentive payments are additional amounts paid to the contractor if specified performance standards are met or exceeded. For example, a contract may allow for an incentive payment to the contractor for early completion of the contract. Incentive payments are included in contract revenue when:\n\n(a) the contract is sufficiently advanced that it is probable that the specified performance standards will be met or exceeded; and\n\n(b) the amount of the incentive payment can be measured reliably.","sortOrder":17},{"sectionNumber":"Contract Costs","sectionType":"part","heading":"Contract Costs","content":"## Contract Costs\n\n16 Contract costs shall comprise:\n\n(a) costs that relate directly to the specific contract;\n\n(b) costs that are attributable to contract activity in general and can be allocated to the contract; and\n\n(c) such other costs as are specifically chargeable to the customer under the terms of the contract.\n\n17 Costs that relate directly to a specific contract include:\n\n(a) site labour costs, including site supervision;\n\n(b) costs of materials used in construction;\n\n(c) depreciation of plant and equipment used on the contract;\n\n(d) costs of moving plant, equipment and materials to and from the contract site;\n\n(e) costs of hiring plant and equipment;\n\n(f) costs of design and technical assistance that is directly related to the contract;\n\n(g) the estimated costs of rectification and guarantee work, including expected warranty costs; and\n\n(h) claims from third parties.\n\nThese costs may be reduced by any incidental income that is not included in contract revenue, for example, income from the sale of surplus materials and the disposal of plant and equipment at the end of the contract.\n\n18 Costs that may be attributable to contract activity in general and can be allocated to specific contracts include:\n\n(a) insurance;\n\n(b) costs of design and technical assistance that are not directly related to a specific contract; and\n\n(c) construction overheads.\n\nSuch costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. The allocation is based on the normal level of construction activity. Construction overheads include costs such as the preparation and processing of construction personnel payroll. Costs that may be attributable to contract activity in general and can be allocated to specific contracts also include borrowing costs.\n\nAus18.1 In respect of not-for-profit public sector entities, costs that may be attributable to contract activity in general and can be allocated to specific contracts also include borrowing costs only when the contractor capitalises borrowing costs in accordance with AASB 123 Borrowing Costs.\n\n19 Costs that are specifically chargeable to the customer under the terms of the contract may include some general administration costs and development costs for which reimbursement is specified in the terms of the contract.\n\n20 Costs that cannot be attributed to contract activity or cannot be allocated to a contract are excluded from the costs of a construction contract. Such costs include:\n\n(a) general administration costs for which reimbursement is not specified in the contract;\n\n(b) selling costs;\n\n(c) research and development costs for which reimbursement is not specified in the contract; and\n\n(d) depreciation of idle plant and equipment that is not used on a particular contract.\n\n21 Contract costs include the costs attributable to a contract for the period from the date of securing the contract to the final completion of the contract. However, costs that relate directly to a contract and are incurred in securing the contract are also included as part of the contract costs if they can be separately identified and measured reliably and it is probable that the contract will be obtained. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period.","sortOrder":18},{"sectionNumber":"Recognition of Contract Revenue and Expe","sectionType":"part","heading":"Recognition of Contract Revenue and Expenses","content":"## Recognition of Contract Revenue and Expenses\n\n22 When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract shall be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period. An expected loss on the construction contract shall be recognised as an expense immediately in accordance with paragraph 36.\n\n23 In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied:\n\n(a) total contract revenue can be measured reliably;\n\n(b) it is probable that the economic benefits associated with the contract will flow to the entity;\n\n(c) both the contract costs to complete the contract and the stage of contract completion at the end of the reporting period can be measured reliably; and\n\n(d) the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates.\n\n24 In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied:\n\n(a) it is probable that the economic benefits associated with the contract will flow to the entity; and\n\n(b) the contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and measured reliably.\n\n25 The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. This method provides useful information on the extent of contract activity and performance during a period.\n\n26 Under the percentage of completion method, contract revenue is recognised as revenue in profit or loss in the reporting periods in which the work is performed. Contract costs are usually recognised as an expense in profit or loss in the reporting periods in which the work to which they relate is performed. However, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately in accordance with paragraph 36.\n\n27 A contractor may have incurred contract costs that relate to future activity on the contract. Such contract costs are recognised as an asset provided it is probable that they will be recovered. Such costs represent an amount due from the customer and are often classified as contract work in progress.\n\n28 The outcome of a construction contract can only be estimated reliably when it is probable that the economic benefits associated with the contract will flow to the entity. However, when an uncertainty arises about the collectibility of an amount already included in contract revenue, and already recognised in profit or loss, the uncollectible amount or the amount in respect of which recovery has ceased to be probable is recognised as an expense rather than as an adjustment of the amount of contract revenue.\n\n29 An entity is generally able to make reliable estimates after it has agreed to a contract which establishes:\n\n(a) each party’s enforceable rights regarding the asset to be constructed;\n\n(b) the consideration to be exchanged; and\n\n(c) the manner and terms of settlement.\n\nIt is also usually necessary for the entity to have an effective internal financial budgeting and reporting system. The entity reviews and, when necessary, revises the estimates of contract revenue and contract costs as the contract progresses. The need for such revisions does not necessarily indicate that the outcome of the contract cannot be estimated reliably.\n\n30 The stage of completion of a contract may be determined in a variety of ways. The entity uses the method that measures reliably the work performed. Depending on the nature of the contract, the methods may include:\n\n(a) the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs;\n\n(b) surveys of work performed; or\n\n(c) completion of a physical proportion of the contract work.\n\nProgress payments and advances received from customers often do not reflect the work performed.\n\n31 When the stage of completion is determined by reference to the contract costs incurred to date, only those contract costs that reflect work performed are included in costs incurred to date. Examples of contract costs which are excluded are:\n\n(a) contract costs that relate to future activity on the contract, such as costs of materials that have been delivered to a contract site or set aside for use in a contract but not yet installed, used or applied during contract performance, unless the materials have been made specially for the contract; and\n\n(b) payments made to subcontractors in advance of work performed under the subcontract.\n\n32 When the outcome of a construction contract cannot be estimated reliably:\n\n(a) revenue shall be recognised only to the extent of contract costs incurred that it is probable will be recoverable; and\n\n(b) contract costs shall be recognised as an expense in the period in which they are incurred.\n\nAn expected loss on the construction contract shall be recognised as an expense immediately in accordance with paragraph 36.\n\n33 During the early stages of a contract it is often the case that the outcome of the contract cannot be estimated reliably. Nevertheless, it may be probable that the entity will recover the contract costs incurred. Therefore, contract revenue is recognised only to the extent of costs incurred that are expected to be recoverable. As the outcome of the contract cannot be estimated reliably, no profit is recognised. However, even though the outcome of the contract cannot be estimated reliably, it may be probable that total contract costs will exceed total contract revenues. In such cases, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately in accordance with paragraph 36.\n\n34 Contract costs that are not probable of being recovered are recognised as an expense immediately. Examples of circumstances in which the recoverability of contract costs incurred may not be probable and in which contract costs may need to be recognised as an expense immediately include contracts:\n\n(a) that are not fully enforceable, that is, their validity is seriously in question;\n\n(b) the completion of which is subject to the outcome of pending litigation or legislation;\n\n(c) relating to properties that are likely to be condemned or expropriated;\n\n(d) where the customer is unable to meet its obligations; or\n\n(e) where the contractor is unable to complete the contract or otherwise meet its obligations under the contract.\n\n35 When the uncertainties that prevented the outcome of the contract being estimated reliably no longer exist, revenue and expenses associated with the construction contract shall be recognised in accordance with paragraph 22 rather than in accordance with paragraph 32.","sortOrder":19},{"sectionNumber":"Recognition of Expected Losses","sectionType":"part","heading":"Recognition of Expected Losses","content":"## Recognition of Expected Losses\n\n36 When it is probable that total contract costs will exceed total contract revenue, the expected loss shall be recognised as an expense immediately.\n\n37 The amount of such a loss is determined irrespective of:\n\n(a) whether work has commenced on the contract;\n\n(b) the stage of completion of contract activity; or\n\n(c) the amount of profits expected to arise on other contracts which are not treated as a single construction contract in accordance with paragraph 9.","sortOrder":20},{"sectionNumber":"Changes in Estimates","sectionType":"part","heading":"Changes in Estimates","content":"## Changes in Estimates\n\n38 The percentage of completion method is applied on a cumulative basis in each reporting period to the current estimates of contract revenue and contract costs. Therefore, the effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate (see AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors). The changed estimates are used in the determination of the amount of revenue and expenses recognised in profit or loss in the period in which the change is made and in subsequent periods.","sortOrder":21},{"sectionNumber":"Disclosure","sectionType":"part","heading":"Disclosure","content":"## Disclosure\n\n39 An entity shall disclose:\n\n(a) the amount of contract revenue recognised as revenue in the period;\n\n(b) the methods used to determine the contract revenue recognised in the period; and\n\n(c) the methods used to determine the stage of completion of contracts in progress.\n\n40 An entity shall disclose each of the following for contracts in progress at the end of the reporting period:\n\n(a) the aggregate amount of costs incurred and recognised profits (less recognised losses) to date;\n\n(b) the amount of advances received; and\n\n(c) the amount of retentions.\n\n41 Retentions are amounts of progress billings that are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified. Progress billings are amounts billed for work performed on a contract whether or not they have been paid by the customer. Advances are amounts received by the contractor before the related work is performed.\n\n42 An entity shall present:\n\n(a) the gross amount due from customers for contract work as an asset; and\n\n(b) the gross amount due to customers for contract work as a liability.\n\n43 The gross amount due from customers for contract work is the net amount of:\n\n(a) costs incurred plus recognised profits; less\n\n(b) the sum of recognised losses and progress billings;\n\nfor all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds progress billings.\n\n44 The gross amount due to customers for contract work is the net amount of:\n\n(a) costs incurred plus recognised profits; less\n\n(b) the sum of recognised losses and progress billings;\n\nfor all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).\n\n45 An entity discloses any contingent liabilities and contingent assets in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets. Contingent liabilities and contingent assets may arise from such items as warranty costs, claims, penalties or possible losses.","sortOrder":22},{"sectionNumber":"Effective Date of IAS 11","sectionType":"part","heading":"Effective Date of IAS 11","content":"## Effective Date of IAS 11\n\n46 \\[Deleted by the AASB\\]","sortOrder":23},{"sectionNumber":"australian guidance","sectionType":"part","heading":"australian guidance","content":"# australian guidance\n\nAustralian Guidance accompanies, but is not part of, AASB 111.","sortOrder":24},{"sectionNumber":"Non‑commercial Contracts","sectionType":"part","heading":"Non‑commercial Contracts","content":"## Non‑commercial Contracts\n\nG1 For not-for-profit entities that are construction contractors, the requirements of AASB 111 Construction Contracts should also be applied to non‑commercial construction contracts and similar arrangements that are binding on the parties to the arrangement but which do not take the form of a documented contract.\n\nG2 A non‑commercial contract or similar arrangement may be either a “fixed price contract” or a “cost plus contract” (which in a non‑commercial context may also be referred to as a “cost based contract”). Contracts and arrangements classified as fixed price contracts may involve the funding of construction activity through indirect means such as through a general appropriation or other allocation of government funds or by general purpose grants. In contrast, contracts and arrangements classified as cost plus (or cost based) contracts may involve full or partial reimbursement of the costs incurred for the construction of the asset from the recipient of the constructed asset and/or from other parties.","sortOrder":25},{"sectionNumber":"DELETED ias 11 TEXT","sectionType":"part","heading":"DELETED ias 11 TEXT","content":"# DELETED ias 11 TEXT\n\nDeleted IAS 11 text is not part of AASB 111.\n\nParagraph 2\n\nThis Standard supersedes IAS 11 Accounting for Construction Contracts approved in 1978.\n\nParagraph 46\n\nThis Standard becomes operative for financial statements covering periods beginning on or after 1 January 1995.","sortOrder":26}],"analysis":{"kimi_summary":{"_metrics":{"model":"kimi-k2.5","source":"moonshot-realtime","completionTokens":2413},"content_quality":"ok","complexity_score":6,"scope_assessment":{"changed":true,"description":"The standard has expanded significantly beyond its original July 2004 scope through seven amending standards (AASB 2007-6 through AASB 2015-3). Key expansions include: (a) introduction of Reduced Disclosure Requirements (Aus1.8-Aus1.9) in 2010 for tiered reporting entities; (b) addition of Aus18.1 in 2009 creating special borrowing cost rules for not-for-profit public sector entities; and (c) multiple extensions to application dates and transitional provisions affecting different classes of entities."},"complexity_factors":["Dual recognition models depending on whether contract outcome can be 'reliably estimated' (paragraphs 22 vs 32)","Different threshold tests for fixed price contracts (4 conditions in paragraph 23) versus cost plus contracts (2 conditions in paragraph 24)","Complex cost allocation rules distinguishing direct costs, attributable overheads, and specifically chargeable items (paragraphs 16-21)","Australian-specific amendments ('Aus' paragraphs) creating layered requirements on top of the international IAS 11 base","Multiple cross-references to other accounting standards including AASB 108, AASB 123, and AASB 137","Detailed rules for combining and segmenting contracts (paragraphs 7-10) and recognition of claims, variations, and incentives (paragraphs 11-15)"],"plain_english_summary":"This standard tells construction contractors how to account for long-term contracts by recognising revenue as work progresses (percentage-of-completion), matching income to work done and ensuring costs and revenue items (variations, claims, incentives) are only included when probable and measurable. It requires immediate recognition of expected losses, limits profit recognition when outcomes are uncertain, and mandates disclosures about contract balances and retention. It also includes Australia-specific reduced-disclosure and public-sector borrowing-cost rules."}},"importantCases":[],"_links":{"self":"/api/acts/aasb-111-construction-contracts-july-2004","history":"/api/acts/aasb-111-construction-contracts-july-2004/history","analysis":"/api/acts/aasb-111-construction-contracts-july-2004/analysis","conflicts":"/api/acts/aasb-111-construction-contracts-july-2004/conflicts","importantCases":"/api/acts/aasb-111-construction-contracts-july-2004/important-cases","documents":"/api/acts/aasb-111-construction-contracts-july-2004/documents"}}