Jordan is a construction contract company involved in building commercial properties. Its current policy for determining the percentage of completion of its contracts is based on the proportion of cost incurred to date compared to the total expected cost of the contract.

One of Jordan’s contracts has an agreed price of $250 million and estimated total costs of $200 million.

The cumulative progress of this contract is:

Year ended:                               30 September 2011            30 September 2012

                                                          $million                                 $million

Costs incurred                                      80                                         145

Work certified and billed                     75                                         160

Billings received                                  70                                         150

Based on the above, Jordan prepared and published its financial statements for the year ended 30 September 2011. Relevant extracts are:

Statement of Profit and Loss

                                                         $million

Revenue (balance)                              100

Cost of sales                                       (80)

                                                           ––––

Profit (50 x 80/200)                            20

                                                           ––––

Statement of financial position

                                                          $million

Current assets

Amounts due from customers

Contract costs to date                           80

Profit recognised                                  20

                                                             ––––

                                                              100

Progress billings                                  (75)

                                                              ––––

                                                                25

                                                              ––––

Contract receivables      (75 – 70)            5

Jordan has received some adverse publicity in the financial press for taking its profit too early in the contract process, leading to disappointing profits in the later stages of contracts. Most of Jordan’s competitors take profit based on the percentage of completion as determined by the work certified compared to the contract price.

Required:

Assuming Jordan changes its method of determining the percentage of completion of contracts to that used by its competitors, and that this would represent a change in an accounting estimate, calculate equivalent extracts to the above for the year ended 30 September 2012.