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 Jordans 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 Jordans competitors take profit based on the percentage of completion as determined by the work certified compared to the contract price.

Required:

1. 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