When can a contractor realize profit under the completed contract method?

Under the completed contract method, a contractor recognizes profit only when the project is fully completed and all contractual obligations are fulfilled. This accounting method defers revenue recognition until the entire contract is finished, which helps to accurately match income with expenses incurred for that specific project.

Choosing the point in time when the project is nearly complete does not accurately reflect the completed contract method; rather, completion of the entire project is required before profit acknowledgment can occur. Profit realization hinges on finalizing all work specified in the contract and ensuring that the owner accepts the completed project, which aligns with financial reporting practices focusing on completed work. Thus, the critical aspect is that no profit can be recognized until construction has concluded, ensuring a more precise reflection of the contractor's financial position and performance according to generally accepted accounting principles.