5301.3 Muli Method of Recognising Profit (Earned Value)
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The Project Industry is about:
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Managing large value contracts over long periods of time.
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Managing a contract where the value of unapproved variations is often larger than the gross margin on the project.
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Having the value of progress claims determined by contractual conditions that may make the claim value much less (or greater) than the value of work completed.
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Muli manages this volatile accounting environment by:-
- Having both the projected income and expense forecast to completion using the project review process.
- Assessing any unapproved variations and assuming a conservative settlement.
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Using this to calculate a Forecast Project Gross Contribution (= Forecast Contract income – Final Forecast cost)
i.e. The predicted gross Contribution at completion. - Then calculating the % Complete = Approved to date / Final Forecast cost
- And Contribution Earned = Project Gross margin, % complete
- So Value of work completed = Project approved costs (Including contribution Earned)
- And finally Project Prepayment = Received – Value of work completed
Project prepayment is Muli's balance sheet item similar to 'Work in progress' .
The above process focuses on the contract expected outcome.
Note: Muli use the word Contribution (not Profit) as a projects make a contribution to overheads and a profit may emerge only after overheads are paid.
Further information on Earned Value is available at:

