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Why is there risk of earnings overstatement in accounting for construction contracts? The long term nature of such contracts makes them a low risk area.

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Why is there risk of earnings overstatement in accounting for construction contracts? The long term nature of such contracts makes them a low risk area. Allocation of revenue and expenses between two or more periods simplifies the accounting Percentage of completion method reduces the potential for earnings management, manipulation and errors. Significant professional judgment is required to make estimates used in the calculations

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