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Generally accepted accounting principles (GAAP) require that revenue be recognized in the period it was earned. This means for most long-term projects, the percentage of completion method should be used.

Percentage of completion (PoC) is an accounting method of work-in-progress evaluation, for recording long-term contracts. GAAP allows another method of revenue recognition for long-term construction contracts, the completed-contract method.

Percentage-of-Completion Method In contrast to the completed-contract method, the percentage-of-completion provides that revenues, costs, and gross profits be recognized through the income statement as the project is being completed instead of all at the end.

The revenue is recognized yearly as a percentage of work completed during that year. Revenue to be recognized = (Percentage of Work Completed in the given period) (Total Contract Value) read more.

The percentage of completion method is an accounting method in which the revenues and expenses of long-term contracts are recognized as a percentage of the work completed during the period.

The percentage of completion method falls in line with IFRS 15, which indicates that revenue from performance obligations recognized over a period of time should be based on the percentage of completion. The method recognizes revenues and expenses in proportion to the completeness of the contracted project.

Generally accepted accounting principles (GAAP) require that revenue be recognized in the period it was earned. This means for most long-term projects, the percentage of completion method should be used.