When is income or loss reported using the Completed Contract Method?

The Completed Contract Method is an accounting technique used primarily in the construction industry that allows contractors to defer reporting income and expenses until the entire project is finished. This method is particularly advantageous for long-term contracts because it avoids the complexities associated with estimating income and expenses over time.

Under this method, income and losses are reported only when the contract is completed, providing a clear snapshot of the overall financial outcome. This means that all revenues and costs associated with the contract are summed up and reflected in the financial statements at once, ensuring that the financial results are aligned with the actual completion of work.

This stands in contrast to other methods, such as the percentage-of-completion method, which report income incrementally throughout the project's duration. Additionally, waiting until the beginning of the contract or when payments are received does not align with the principles of the Completed Contract Method, as it focuses on project completion rather than cash flow timing or initial contract phases.