Complete CCIFP Study Set – 2025
Exam Questions & Answers207
ASC 605-35 - ANSWERS-In 1981 the AICPA issued a new Audit and Accounting Guide,
"Construction Contractors". Simultaneously, the AICPA issued a statement of Position 81-1 now
known as:
Percentage of completion method - ANSWERS-Of the two GAAP acceptable methods for income
recognition, which one is more preferred?
Completed Contract Method - ANSWERS-Which one of the following is an Acceptable income
recognition methods in accordance with GAAP
Revenue, costs and gross profit are recognized in all accounting periods throughout the duration
of the contract - ANSWERS-Which income recognition method is considered the Percentage of
Completion method?
Cash basis, Accrual (billing), Hybrid Basis - ANSWERS-These methods are only acceptable for
financial reporting in conformity with GAAP and not for revenue recognition
Completed contract method when contract is substantially completed and accepted -
ANSWERS-Revenue, costs and gross profits, when not recognized until the contract has been
substantially completed and accepted is considered which income recognition method?
reasonably dependable estimates of revenue, costs and progress toward completion -
ANSWERS-To use the percentage of completion method, a contractor must be able to provide:
,Cost to Cost method, Efforts expended method, Units of work performed method - ANSWERS-
Accepted Methods of measuring the extent of progress toward completion for percentage of
completion
Completed contract Method - ANSWERS-Accepted method of income recognition GAAP
inherent risks - ANSWERS-Normally, the completed contract method is only used
when_______________ associated with the contract preclude the contractor's ability to
reasonably estimate contract revenues, costs or gross profit.
ASC 606 - ANSWERS-Revenue recognition standard requiring revenue to be recognized as each
performance obligation is satisfied, either over time or at a point in time, ensuring accurate
financial reporting aligned with control transfer.
OCBOA - ANSWERS-Other Comprehensive Basis of Accounting, a non-GAAP framework
including cash basis, modified cash basis, or income tax basis, used for simpler reporting by
private entities.
FRF for SMEs - ANSWERS-Financial Reporting Framework for Small and Medium-sized Entities, a
simplified OCBOA for private companies, designed for tax compliance and reduced complexity.
Income Tax Basis - ANSWERS-OCBOA method where financial statements align with tax return
reporting rules, focusing on tax-deductible revenues and expenses.
Cash Basis - ANSWERS-OCBOA method recognizing revenue and expenses only when cash
changes hands, ignoring accruals for simplicity.
Retainage - ANSWERS-Amount withheld by the owner to ensure project completion, not an
account receivable or contract asset, reported as a separate line item on financial statements.
,Materiality - ANSWERS-Information that, if omitted or misstated, could influence a financial
statement user's decision, guiding reporting thresholds and audit focus.
Contract Receivables - ANSWERS-Amounts owed from contracts, presented separately from
other receivables under GAAP to highlight contract-specific risks and terms.
Government Receivables - ANSWERS-Receivables from government entities, considered
financially stable due to public funding, disclosed separately in financial statements.
Tax Refunds - ANSWERS-Receivables from tax authorities for overpaid taxes, presented
separately to reflect distinct collectability.
Related Party Receivables - ANSWERS-Receivables from entities with common ownership or
control, requiring separate GAAP disclosure due to potential bias or conflicts.
Billings on Uncompleted Contracts - ANSWERS-GAAP disclosure for amounts billed but not yet
earned on in-progress contracts, reflecting overbilling status.
Receivables from Unearned Income - ANSWERS-GAAP disclosure for receivables tied to revenue
not yet recognized, often from advance billings for future work.
Retainage Disclosure - ANSWERS-GAAP requires disclosing retainage expected to be collected
within one year, distinguishing short-term from long-term assets.
Concentrations of Credit Risk - ANSWERS-Disclosure of significant customer or industry
concentrations that could jeopardize receivable collection if defaults occur.
Past Due Policy - ANSWERS-GAAP-required disclosure of the policy for determining when
receivables are past due or delinquent, impacting collectability assessments.
, Charge-Off Policy - ANSWERS-GAAP-required disclosure of the policy for writing off uncollectible
receivables, guiding loss recognition and financial accuracy.
Contract Assets - ANSWERS-Revenue earned but not billed, often from percentage of
completion method, sometimes discounted by lenders for financing, distinct from receivables.
Contract Liabilities - ANSWERS-Obligations to deliver goods or services for payments received,
considered a 'good liability' providing free financing until earned.
Percentage of Completion Method - ANSWERS-Revenue recognition method based on
proportion of work completed, resulting in contract assets or liabilities due to timing
differences. E.g., 40% done on $1M contract = $400,000 revenue.
Unbalanced Items - ANSWERS-Contract assets or liabilities arising from uneven revenue and
billing timing in percentage of completion, reflecting over- or underbilling. E.g., overbilling
creates a liability when billings exceed revenue.
Input Method - ANSWERS-Estimates percent complete by costs incurred, such as labor hours or
materials, for revenue recognition under ASC 606. E.g., labor hours indicate 50% project
completion.
Output Method - ANSWERS-Estimates percent complete by milestones, such as units delivered
or project phases completed, for revenue recognition. E.g., 2 of 4 bridge sections complete =
50% revenue.
Revenue Recognition Restriction - ANSWERS-GAAP prohibits revenue recognition until the final
contract amount is agreed upon, preventing premature or speculative revenue. E.g., revenue
deferred until client signs final contract.
Exam Questions & Answers207
ASC 605-35 - ANSWERS-In 1981 the AICPA issued a new Audit and Accounting Guide,
"Construction Contractors". Simultaneously, the AICPA issued a statement of Position 81-1 now
known as:
Percentage of completion method - ANSWERS-Of the two GAAP acceptable methods for income
recognition, which one is more preferred?
Completed Contract Method - ANSWERS-Which one of the following is an Acceptable income
recognition methods in accordance with GAAP
Revenue, costs and gross profit are recognized in all accounting periods throughout the duration
of the contract - ANSWERS-Which income recognition method is considered the Percentage of
Completion method?
Cash basis, Accrual (billing), Hybrid Basis - ANSWERS-These methods are only acceptable for
financial reporting in conformity with GAAP and not for revenue recognition
Completed contract method when contract is substantially completed and accepted -
ANSWERS-Revenue, costs and gross profits, when not recognized until the contract has been
substantially completed and accepted is considered which income recognition method?
reasonably dependable estimates of revenue, costs and progress toward completion -
ANSWERS-To use the percentage of completion method, a contractor must be able to provide:
,Cost to Cost method, Efforts expended method, Units of work performed method - ANSWERS-
Accepted Methods of measuring the extent of progress toward completion for percentage of
completion
Completed contract Method - ANSWERS-Accepted method of income recognition GAAP
inherent risks - ANSWERS-Normally, the completed contract method is only used
when_______________ associated with the contract preclude the contractor's ability to
reasonably estimate contract revenues, costs or gross profit.
ASC 606 - ANSWERS-Revenue recognition standard requiring revenue to be recognized as each
performance obligation is satisfied, either over time or at a point in time, ensuring accurate
financial reporting aligned with control transfer.
OCBOA - ANSWERS-Other Comprehensive Basis of Accounting, a non-GAAP framework
including cash basis, modified cash basis, or income tax basis, used for simpler reporting by
private entities.
FRF for SMEs - ANSWERS-Financial Reporting Framework for Small and Medium-sized Entities, a
simplified OCBOA for private companies, designed for tax compliance and reduced complexity.
Income Tax Basis - ANSWERS-OCBOA method where financial statements align with tax return
reporting rules, focusing on tax-deductible revenues and expenses.
Cash Basis - ANSWERS-OCBOA method recognizing revenue and expenses only when cash
changes hands, ignoring accruals for simplicity.
Retainage - ANSWERS-Amount withheld by the owner to ensure project completion, not an
account receivable or contract asset, reported as a separate line item on financial statements.
,Materiality - ANSWERS-Information that, if omitted or misstated, could influence a financial
statement user's decision, guiding reporting thresholds and audit focus.
Contract Receivables - ANSWERS-Amounts owed from contracts, presented separately from
other receivables under GAAP to highlight contract-specific risks and terms.
Government Receivables - ANSWERS-Receivables from government entities, considered
financially stable due to public funding, disclosed separately in financial statements.
Tax Refunds - ANSWERS-Receivables from tax authorities for overpaid taxes, presented
separately to reflect distinct collectability.
Related Party Receivables - ANSWERS-Receivables from entities with common ownership or
control, requiring separate GAAP disclosure due to potential bias or conflicts.
Billings on Uncompleted Contracts - ANSWERS-GAAP disclosure for amounts billed but not yet
earned on in-progress contracts, reflecting overbilling status.
Receivables from Unearned Income - ANSWERS-GAAP disclosure for receivables tied to revenue
not yet recognized, often from advance billings for future work.
Retainage Disclosure - ANSWERS-GAAP requires disclosing retainage expected to be collected
within one year, distinguishing short-term from long-term assets.
Concentrations of Credit Risk - ANSWERS-Disclosure of significant customer or industry
concentrations that could jeopardize receivable collection if defaults occur.
Past Due Policy - ANSWERS-GAAP-required disclosure of the policy for determining when
receivables are past due or delinquent, impacting collectability assessments.
, Charge-Off Policy - ANSWERS-GAAP-required disclosure of the policy for writing off uncollectible
receivables, guiding loss recognition and financial accuracy.
Contract Assets - ANSWERS-Revenue earned but not billed, often from percentage of
completion method, sometimes discounted by lenders for financing, distinct from receivables.
Contract Liabilities - ANSWERS-Obligations to deliver goods or services for payments received,
considered a 'good liability' providing free financing until earned.
Percentage of Completion Method - ANSWERS-Revenue recognition method based on
proportion of work completed, resulting in contract assets or liabilities due to timing
differences. E.g., 40% done on $1M contract = $400,000 revenue.
Unbalanced Items - ANSWERS-Contract assets or liabilities arising from uneven revenue and
billing timing in percentage of completion, reflecting over- or underbilling. E.g., overbilling
creates a liability when billings exceed revenue.
Input Method - ANSWERS-Estimates percent complete by costs incurred, such as labor hours or
materials, for revenue recognition under ASC 606. E.g., labor hours indicate 50% project
completion.
Output Method - ANSWERS-Estimates percent complete by milestones, such as units delivered
or project phases completed, for revenue recognition. E.g., 2 of 4 bridge sections complete =
50% revenue.
Revenue Recognition Restriction - ANSWERS-GAAP prohibits revenue recognition until the final
contract amount is agreed upon, preventing premature or speculative revenue. E.g., revenue
deferred until client signs final contract.
