Question: Lombardo Construction Corp began work on a 100 million construction contract
Lombardo Construction Corp. began work on a $100-million construction contract in 2014 to build a luxury hotel to be completed in 2016. During 2014, Lombardo incurred costs of $42 million, billed its customer for $38 million, and collected $35 million. In 2014, the construction industry also experienced significant expansion, rendering construction materials and labour more costly than originally estimated. At December 31, 2014, Lombardo has determined that it is difficult to estimate the costs to complete construction and therefore difficult to estimate the percent complete. Determine the amount of revenue that would be recognized in 2014 under current IFRS (IAS 11 and 18) and the zero-profit method. Lombardo believes it can recover at least the amount of costs incurred to date.
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