What is Cost to Complete?
Cost to complete is the estimated remaining cost required to finish a long-term contract from a given point in time. It is the key input for measuring progress under the cost-to-cost method of IFRS 15 and for assessing whether a contract is or has become onerous.
How It Works
- Forecast all remaining direct labor, materials, subcontractor and overhead costs.
- Update the estimate at each reporting date.
- Use it in the percentage-of-completion calculation: costs incurred / (costs incurred + cost to complete).
- Recognize a loss provision immediately if total expected costs exceed contract revenue.
Saudi Context
Saudi contractors revise cost-to-complete estimates regularly under IFRS 15, especially when steel, cement or labor prices shift sharply.
Example
If costs incurred to date are SAR 4 million and cost to complete is SAR 6 million, the percentage of completion is 4 / 10 = 40 percent.