Legal Definitions - completed-contract accounting method

The completed-contract accounting method is a system for reporting profit or loss on certain long-term contracts by recognizing gross income and expenses in the tax year that the contract is completed.

For example, if a construction company signs a contract to build a new office building and the contract takes three years to complete, the completed-contract accounting method would recognize all the income and expenses related to the project in the year that the building is finished.

This method is different from the percentage-of-completion method, which recognizes revenue gradually during the completion of the subject matter of the contract.

The completed-contract accounting method is commonly used in the construction industry and other industries that involve long-term contracts.