bbut the proportional cost recognized under this method may not be equal to the actual costs incurred. Some accountants believe that the amount of costs recognized should be equal to the costs actually incurred, an alternative to the preceding approach was included in Statement of Position (SOP) 81-1 (AICPA). Under this actual costs approach (refer to No. 33), revenue Is defined as the actual costs incurred on the contract plus the gross profit earned for the period in the contract. In SOP 81-1, under actual cost approach, Revenue is defined as the actual cost incurred plus the gross profit earned (under proportional cost approach). Refer to Nos. 12 and 32 for further discussion. Ina footnote in the AICPA SOP 81-1, the committee made it clear that the actual cost approach and the proportional cost approach are equally acceptable, (It should be noted that these two approaches were not mentioned In PAS No. 1but ti interesting to know the applications of such approaches by referring ‘to AICPA SOP 81-1 which has a persuasive effect on the Philippine GAAP, especially ifthe PAS not clear on this particular issue.) However, because the actual costs approach results in a different gross profit percent from period to period whenever the measurement of completion differs from that which would ‘occur ifthe cost-to-cost method were used, some authors in US inclined to use the proportional cost approach But it seems that IFRS thru their seminar training material favor the use of actual cost approach, Proportional Cost Approach: Contract price —— PIX ‘Multiplied by: Percentage of completion % Recognized revenue to date ... 006 Less: Recognized revenue in prior yeaPS 200 Recognized revenue @ach Year vonmn PXX ‘Actual Cost Approach: CCost incurred each year (actual cost. xxx ‘Add: Recognized profit each Yea cu 0 Recognized revenue each year .. PAX B. Cost Recovery Method of Construction Accounting/ Hybrid/ Zero-profit Approach When the outcome of a construction contract cannot be estimated reliably: Revenue should be recognized only tothe extent of contract costs incurred that itis probable will be recoverable; and . Contract costs should be recognized as an expense in the period in which they are incurred. It isto be mentioned that IFRS no longer uses the term “completed contract method". PAS No. 11 (IAS), paragraph 31, provides that when the outcome of a construction contract cannot be estimated reliably, revenue should be recognized only to the extent of the