Revenue Recognition for long-term contracts

Revenue recognition for long-term contracts involves determining when and how much revenue a company can report from projects that take a long time to complete, like construction or software development. Instead of waiting until the project is finished, companies often recognize revenue gradually as work is completed. This approach, known as "percentage of completion," reflects ongoing progress and expenses, providing a more accurate picture of financial health. It ensures that income is matched with the costs incurred during the project, aligning financial statements with the actual work being done over time.