Overview of interim revenue recognition in Project Control (PCS)Why interim revenue recognition? When you manufacture products using projects in Project Control (PCS), you often deal with long lead times. During the projects, actual costs are recorded. Revenues and Cost of Goods Sold (COGS) can be determined at the end of the project when the products are finished and delivered. However, international accounting rules, for example, IFRS (International Financial Reporting Standards) require more transparancy in business financials. Public companies must be able to recognize costs and revenues not only at the end of the project but also on different moments during the project. With revenue recognition in PCS you can determine the interim revenue and interim Costs of Goods Sold (COGS) for an unfinished project, even before shipping any end item. Terms
Percentage of completion If you want to know the interim COGS and interim revenues at a specific moment, you must first determine which percentage of the work on the project is completed. You can use three methods to calculate the percentage of completion (POC):
To calculate interim revenue and COGS To calculate the interim revenue on a specific moment, the following calculation is carried out: To calculate the interim COGS on a specific moment, the following calculation is carried out: Procedure for interim revenue recognition To calculate interim COGS and revenue, you must go through a number of sessions: The details are described in Procedure for interim revenue recognition in Project Control (PCS)
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