completed contract method

completed contract method
Completed contract method.
A method of reporting profit or loss on certain long-term contracts. Under this method of accounting, gross income and expenses are recognized in the tax year in which the contract is completed. This method should be used only when the conditions or terms of the contract do not permit use of the percent of completion method.
See also accounting.
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A method used in accounting to report profit or loss on long term contracts in the year the contract is complete, except that losses must be recognized in the year incurred. This method differs from the percent of completion method where revenues and expenses are recorded over the life of the contract in accordance with the level of progress. The completed contract method is not allowed for tax purposes for long term contracts entered into after February 28, 1986. The acceptable methods for contracts entered into after February 28, 1986 include; percent of completion and percent of completion-capitalized cost method which combines the elements of the completed contract and percent of completion methods.

Black's law dictionary. . 1990.

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