Royal BAM Group nv (2010)
3. Summary of significant accounting policies [extract]
3.10 Construction contracts [extract]
The Group uses the ‘percentage of completion method’ to determine the appropriate amount to be recognised in a given period. The stage of completion is measured by reference to the contract cost incurred as percentage of total actual or estimated project cost. Revenues and result are recognised in the income statement based on this progress.
Projects are presented in the balance sheet as receivables from or payables to customers on behalf of the contract. If the costs incurred (including the result recognised) exceed the invoiced instalments, the contract will be presented as a receivable. If the invoiced instalments exceed the costs incurred (including the result recognised) the contract will be presented as a liability.
Contracts containing the construction of a project and the possibility of subsequent long-term maintenance of that project as separate components, or for which these components could be negotiated individually in the market, are accounted for as two separate contracts. Revenue and results are recognised accordingly in the income statement as construction contracts for third parties or the rendering of services respectively.
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