ASBE No. 15
Superseded
Construction Contracts (Superseded)
Construction Contracts (Superseded) is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
Superseded Standard
ASBE 15 was superseded by ASBE 14. This standard is retained for historical reference only.
ASBE 15 governed revenue and costs for long-term construction contracts using a dedicated percentage-of-completion methodology. Its substance has been absorbed into ASBE 14's general five-step revenue model.
Current Standard
ASBE 14 Revenue 1
Conceptual Framework Linkage
The predecessor to today's general revenue model
ASBE No. 15 GOVERNED the RECOGNITION of REVENUE and COSTS for LONG-TERM construction CONTRACTS, using a DEDICATED percentage-of-COMPLETION methodology – a SEPARATE, standalone FRAMEWORK distinct FROM ordinary sales REVENUE recognition. FOLLOWING the 2017 REVISION of ASBE No. 14 (see the COMPANION poster), this STANDARD'S substance has been ABSORBED into the GENERAL five-step revenue MODEL, PARALLELING how IFRS 15 ABSORBED the equivalent OLD IAS 11 internationally.
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Scope – Long-Term Construction Contracts
Contracts specifically negotiated for the construction of an asset
This Standard APPLIED to CONTRACTS specifically NEGOTIATED for the CONSTRUCTION of a SINGLE asset (or a CLOSELY interrelated GROUP of assets), TYPICALLY spanning MULTIPLE accounting PERIODS – BUILDINGS, infrastructure, LARGE industrial FACILITIES, and SIMILAR long-duration PROJECTS.
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The Percentage-of-Completion Method
Revenue and costs recognised by reference to progress
WHERE the OUTCOME of a CONSTRUCTION contract COULD be estimated RELIABLY, contract REVENUE and contract COSTS were RECOGNISED by REFERENCE to the STAGE of COMPLETION of the CONTRACT activity at the BALANCE Sheet date – the "PERCENTAGE-OF-COMPLETION" method – MATCHING revenue RECOGNITION to the PROGRESS of the WORK performed.
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Measuring Stage of Completion
Cost-to-cost, surveys, or physical proportion methods
STAGE of COMPLETION was MEASURED using WHATEVER method RELIABLY reflected the WORK performed – MOST commonly the PROPORTION of CONTRACT costs INCURRED to date RELATIVE to the ESTIMATED total CONTRACT costs (the "COST-to-cost" method), or ALTERNATIVELY surveys of WORK performed or COMPLETION of a PHYSICAL proportion of the CONTRACT work.
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The Completed-Contract Fallback
Where the outcome cannot be estimated reliably
WHERE the OUTCOME of a CONSTRUCTION contract COULD NOT be estimated RELIABLY, revenue was RECOGNISED ONLY to the EXTENT of CONTRACT costs INCURRED that were LIKELY to be RECOVERABLE, WITH contract COSTS expensed as INCURRED – a MORE CONSERVATIVE fallback APPROACH avoiding the RECOGNITION of PROFIT before OUTCOME certainty existed.
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Immediate Recognition of Anticipated Losses
The full loss recognised as soon as it becomes probable
WHERE it BECAME PROBABLE that TOTAL contract COSTS would EXCEED total CONTRACT revenue, the ENTIRE expected LOSS was RECOGNISED IMMEDIATELY as an EXPENSE – REGARDLESS of the STAGE of completion REACHED, CONSISTENT with a PRUDENT, loss-RECOGNITION-forward APPROACH.
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How This Maps to the Current ASBE No. 14 Framework
Broadly the same economic outcome, differently derived
UNDER the CURRENT ASBE No. 14, a CONSTRUCTION contract MEETING the OVER-TIME recognition CRITERIA (customer CONTROLS the asset AS it's CREATED, or the ASSET has NO alternative USE with an ENFORCEABLE right to PAYMENT) PRODUCES a BROADLY SIMILAR economic OUTCOME to the OLD percentage-of-COMPLETION method – but the ANALYTICAL starting POINT is now the GENERAL five-step MODEL'S over-time CRITERIA, RATHER than a SEPARATE, construction-SPECIFIC methodology.
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Worked Example – the Old Percentage-of-Completion Method
Recognising revenue by reference to cost incurred
Example: A bridge construction project (historical treatment)
A construction company undertakes a bridge project with a total contract price of RMB 400,000,000 and estimated total costs of RMB 320,000,000. By year end, RMB 160,000,000 of costs have been incurred.
Stage of COMPLETION = RMB 160,000,000 ÷ RMB 320,000,000 = 50%. Under the OLD percentage-of-COMPLETION method, the COMPANY recognised REVENUE of RMB 400,000,000 × 50% = RMB 200,000,000 for the year.
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Worked Example – Recognising an Anticipated Loss
The full loss taken immediately, not spread over remaining progress
Example: A contract turning loss-making (historical treatment)
Continuing the prior example, revised cost estimates now indicate total contract costs will reach RMB 420,000,000 – RMB 20,000,000 above the RMB 400,000,000 contract price.
The company IMMEDIATELY recognised the FULL anticipated LOSS of RMB 20,000,000 as an EXPENSE, REGARDLESS of the 50% STAGE of completion ALREADY reached – a PRUDENT, forward-LOOKING loss recognition RULE.
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Disclosure Requirements (Historical)
What ASBE No. 15 previously required
Contract revenue recognised during the periodMethod used to determine stage of completionAmounts of advances received and retentions
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Critical Judgments & Estimates
Where judgement mattered most
SIGNIFICANT JUDGEMENTS
Whether the outcome of a contract could be estimated reliably
SIGNIFICANT ESTIMATES
Total estimated contract costs, underlying the stage-of-completion calculation
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Relationship to the Old IAS 11
Comparison – the historical ASBE 15 vs the historical IAS 11
FeatureASBE 15 (historical)IAS 11 (historical, pre-IFRS 15)
Percentage-of-completion approachYESYES – converged
Both standards' current statusSUPERSEDED, absorbed into ASBE No. 14SUPERSEDED, absorbed into IFRS 15
A GENUINELY parallel HISTORY – BOTH standards WERE broadly CONVERGED while ACTIVE, and BOTH were RETIRED at broadly the SAME point in the GLOBAL move toward a UNIFIED revenue MODEL.
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Statement Mapping
Where every construction contract event landed (historical)
EventStatement(s) affectedNotes
Percentage-of-completion revenueIS BSNow governed by ASBE No. 14's general model
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Related Standards
Cross-reference map
StandardConnection
ASBE No. 14Revenue – the current, unified Standard whose 2017 revision absorbed this Standard's substance
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Quick-Reference Glossary
Percentage-of-completion method
The historical approach recognising construction contract revenue and costs by reference to the stage of completion reached at each reporting date.
Stage of completion
The proportion of contract work performed to date, most commonly measured as costs incurred relative to total estimated contract costs.
Financial statement key (Chinese GAAP / ASBE terminology)
BS Balance Sheet (资产负债表)
IS Income Statement (利润表)
SCOE Statement of Changes in Owners' Equity (所有者权益变动表)
CFS Cash Flow Statement (现金流量表)
History & Development
2006-02
ASBE No. 15 Construction Contracts issued
Superseded by ASBE No. 14