Long-Term Contracts

Accounting Method
An accounting method refers to the rules a company follows in reporting revenues and expenses, which are crucial for computing income and determining taxable income.
Completed-Contract Method
The completed-contract method is an accounting approach where net profit on a long-term contract is reported only when the contract is fully completed. Pre-completion expenses are also deferred until the project is finished.
Contract Costing
Contract costing is a costing technique used for long-term contracts like civil engineering projects, where costs are allocated on a contract-by-contract basis. It addresses the complications in determining annual profits for incomplete contracts through the valuation of work in progress.
Percentage-of-Completion
The percentage-of-completion method is an accounting practice used principally for long-term contracts, in which revenue and expenses are recognized proportionally over the term of the project.
Percentage-of-Completion Method
An accounting method used to report income from long-term contracts based on the percentage of contract completion during the tax year.
Private Finance Initiative (PFI)
Private Finance Initiative (PFI) is a procurement method used by the public sector to fund major infrastructure projects with private capital. It involves long-term contracts between private partners and government entities.
Progress Payment
A progress payment is a payment made to a contractor based on the stage of work completed at a specified date, as certified by an agreed authority. It is commonly used in long-term contracts such as civil engineering, shipbuilding, or large items of plant and machinery.
Transfer Credit Risk
Transfer credit risk refers to the risk faced by a creditor, often in long-term contracts, due to a foreign debtor's inability to obtain foreign currency from the central bank despite being able and willing to pay. It is an aspect of international credit exposure.

Accounting Terms Lexicon

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