This document outlines the key principles of Ind AS 11 Construction Contracts. It discusses the history, applicability, types of contracts, revenue and cost recognition, degree of completion methods, disclosures required, and accounting for service concession arrangements. The standard is mandatory for construction contracts but not real estate transactions. Revenue is recognized based on the percentage of completion or cost incurred to date depending on whether the outcome can be reliably estimated. Costs include direct, allocated, and excluded costs. Extensive disclosures are required around revenue, methods, costs, and balances.

2. History
Issued December 1983
Revised 2002
Status
Mandatory
No Exemption
Applicability
Only on Construction
Contracts Not on Real Estate
Transaction
Note- Ind AS-11 is applicable on Real Estate transaction also.

3. ACCOUNTING/ALLOCATION
Revenue Cost
Objective

4. Construction Contract
Specifically Negotiated for Construction OF
An Asset
Combination of Asset which are closely interrelated or
inter dependent

5. Type Of
Contract
Fixed Price
Contract
Cost Plus
Contract
Hybrid
Contract

6. Combining of Contracts
Negotiated as single
package.
Closely interrelated.
Performed concurrently
or in a continuous
sequence

7. Segmenting of Contracts
Separate proposal for
each asset.
Costs and revenues can
be identified.
Each asset subject to
separate negotiation and
acceptance

8. Additional Asset
The asset differs significantly
from the original asset
The price of asset is independent
of original contract
Separate

9. Contract
Revenue
Initial amount
of revenue
agreed
Claims
Variations in
contract work
Escalation
Clause
Incentive
payments
Penalties
AS-7 = Full value
of consideration
received or
receivable
Ind AS-11
Revenue =Fair
value of
consideration
received or
receivable

10. Contract Cost
• Site labor cost
• Cost of material
• Depreciation of plant & equipment
• Cost of hiring plant & equipment
• Transportation charges
• Expected warranty cost
• Cost of design & technical assistance
• Claims from third parties
Cost Directly Related To the Contract
• Insurance
• Cost of design & technical assistance not directly related to the contract
• Construction overheads
Cost Allocated to contract
• Selling costs
• Research & development costs for which reimbursement not specified
• General administration cost for which reimbursement not specified
• Depreciation of idle plant & machinery
But Exclude

11. Recognition (Revenue or Cost)
Outcome can be estimated
reliably
Degree of completion
Basis
outcome cannot be estimated
reliably
Contract revenue
=current cost incurred
of which recovery is
probable.
In Both the cases probable/ expected loss should be provide for.

12. When the outcome of the contract can be
reliable measured ?
• Probable that economic benefit will flow to the enterprise.
• Estimated cost of contract can be measured so that it can be
compared with the cost incurred.
Cost Plus Contract,
• Contract revenue can be measured reliably.
• Contract cost and stage of completion can be measured reliably, at
reporting date.
• Probable that economic benefit will flow to the enterprise.
• Estimated cost of contract can be measured so that it can be
compared with the cost incurred.
Fixed Price Contract

13. Degree of
completion
Percentage
Completion
Cost Basis Time basis
Survey
Physical
Proportion

14. Service Concession Arrangements-Ind AS11
• Grantor
• Operator
• General Public
Three Parties
• Operator is responsible for operation and management of infrastructure.
• Contract set the price and regulate the future revision.
• Operator is obliged to handover the infrastructure to the grantor.
Features
• What services to be provided.
• To whom services should be provided.
• At what price it must be provided.
Applies only if the grantor control and regulate

15. Accounting
Treatment
Operator’s
rights over the
infrastructure.
Not An
Asset
Other items
provided to the
operator by the
grantor.
Not an
asset
Recognition and
measurement of
the consideration.
Fair value of the
amount received
or receivable
Treatment of
borrowing cost.
Capitalized in
intangible
asset
Treatment of
Intangible
asset.
Capitalized
at fair value
Treatment of
financial asset
Capitalize at
fair value

16. Disclosures
Revenue
Recognized
Method to use to
determine the
Contract
Revenue
Method for
calculating the
Degree of
Completion
Total cost
incurred and
profit
recognized
Advances
Retentions
Gross debtors
Progress Billing