Method A, Segmented (Posting Level)

Method A (Cost-to-Cost) calculates revenue based on the activity's percentage of completion. When method A is used, the percentage of completion is calculated as:

Segmented contracts result when a single contract is broken down into smaller components for revenue recognition purposes. The percentage of completion for a segmented contract is calculated at the posting level.

In order to use the segmented option, you must have defined budgets for the posting level activities listed on Contract Detail (BR10.2). Only those activities that have been flagged Yes (Y) in the Inc Activity field will be included in the revenue recognition calculation.

In the United States, generally accepted accounting principles allow contracts to be segmented under certain circumstances. For specific circumstances, see SOP 81-1, Accounting for Performance of Construction-Type, and Certain Production-Type Contracts.

Example 1- Method A, Segmented

Note: Only those account categories which have accumulated costs recognize the revenue.

Because SBC is segmenting this contract, the percentage of completion revenue is calculated and posted to the posting level activities.