shootingstar

Dear Thu Thuy,

The loss is recognized based on the remaining expected cost of completing the contract and the revenue to be collected from the contract.

For example:
you entered in to a contract for USD 1000 and the cost of the contract is estimated to be USD 800. Suppose after one year contract is 50% completed. Thus you will recognize USD 500 as revenue and USD 400 as cost. Now if at the end of year one, the cost of completing the remaining 50% of the contract is revised upward to USD 600 instead of earlier estimate of USD 400 then the excess of the cost over the revenue is immediately recognized as loss.

Hope this will clarify.