Industry
↳ Revenue reflects long-term contract activity and estimation complexity.
Benchmark
Performance Materiality
Reduces the probability that uncorrected misstatements exceed overall materiality.
Clearly Trivial
Misstatements below this need not be accumulated unless qualitatively material.
ISA 320 Decision Tree
One-page visual guide for benchmark selection — plus one practical audit insight per week.
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Benchmark Guidance
Construction and engineering companies recognise revenue over time under IFRS 15 using input or output methods to measure progress toward completion. This creates inherent estimation risk in both revenue and contract asset balances.
Choosing the Right Benchmark
Revenue at 0.5–1% is the standard range for construction entities. For large contractors with stable order books, the lower end is appropriate.
Key Audit Considerations
Revenue recognition over time under IFRS 15 — percentage of completion — is the primary area of estimation uncertainty.
Contract modifications, claims, and variation orders create additional measurement complexity.
Onerous contract provisions require assessment of estimated total contract costs against expected revenue.
Retention receivables and their recoverability may warrant specific attention.
Joint venture and consortium arrangements are common — IFRS 11 classification and related party implications should be considered.
ISA 320.10 — Determine materiality for the financial statements as a whole when establishing the overall audit strategy.
ISA 320.11 — Determine performance materiality for assessing risks and determining further audit procedures.
ISA 320.A4 — Common benchmarks: PBT, revenue, gross profit, total expenses, total equity, or net asset value.