When is income or loss reported in the completed contract method?

Using the completed contract method, income or loss is reported in the year the contract is completed. This accounting method defers the recognition of revenue and expenses until the entire project is finished. Thus, all income and expenses related to the contract do not appear on the financial statements until there is a finalization of the contract, which provides a clear view of total profitability once all the costs have been accounted for and the revenue recognized. This approach is often utilized for long-term contracts in construction because it avoids ongoing estimates of income and expenses during the construction phase, simplifying reporting and potentially aligning better with cash flow recognition.