How construction companies recognise revenue under IFRS 15

When should a construction company recognise revenue: as a project progresses or only when the completed asset is handed over? Under IFRS 15, the answer depends on who controls the asset, the terms of the contract and whether the criteria for recognising revenue over time are met. We examined the 2025 financial statements of Finnish construction group YIT and Swedish construction group NCC using Clarifo MCP to see how these principles work in practice.

This guide explains IFRS 15 construction revenue recognition, the cost-to-cost method, contract modifications and the accounting judgments that matter most. It also shows how finance professionals can research real company disclosures using Clarifo in ChatGPT and Claude, with links to the original financial statements.

IFRS 15: when construction revenue is recognised over time

IFRS 15 Revenue from Contracts with Customers requires companies to recognise revenue when or as control of promised goods or services transfers to the customer. For construction projects, this means that the duration of a contract does not, by itself, determine the timing of revenue recognition.

Under paragraph 35 of IFRS 15, revenue is recognised over time when at least one of three conditions is satisfied:

• The customer simultaneously receives and consumes the benefits as the company performs.
• The construction activity creates or enhances an asset that the customer controls as it is created or enhanced.
• The asset has no alternative use to the company, and the company has an enforceable right to payment for performance completed to date.

If none of these conditions is met, revenue is recognised at a point in time when control transfers to the customer. For property development, this may occur when the completed building or apartment is handed over.

The assessment must consider the actual contractual rights and obligations, including applicable laws. A long construction period or an advance payment does not automatically justify over-time recognition. ¹

Real example: YIT recognises construction and residential development revenue differently

YIT's 2025 financial statements provide a practical example of how different revenue recognition methods can exist within the same construction group.

Construction contracts: revenue recognised over time

For most of its contracting activities, YIT explains that construction takes place on land controlled by the customer. As the customer controls the asset under construction, the criteria for recognising revenue over time are generally met.

YIT measures progress using an input-based method. The stage of completion is determined by comparing actual costs incurred with estimated total project costs.

The company also explains that construction contracts commonly involve one integrated performance obligation rather than several separately identifiable services. Read YIT's 2025 accounting policy, page 138. ²

Finnish residential development: revenue recognised at completion

YIT applies a different approach to self-developed residential construction in Finland.

Its 2025 financial statements explain that revenue from residential development is recognised at a point in time, when construction is completed and control of the apartment transfers to the customer.

YIT identifies the buyer's right to cancel the contract under the Finnish Housing Transactions Act as a reason why the over-time recognition criteria are not met.

This distinction is important: construction progress and customer payments may occur throughout the project, while revenue recognition takes place upon completion and transfer of control. Source: YIT 2025 Financial Statements, page 138. ²

Real example: NCC uses percentage-of-completion accounting

NCC's 2025 financial statements provide another example of IFRS 15 in practice. The company explains that revenue from construction and civil engineering contracts is generally recognised progressively as work is completed.

NCC refers to this approach as percentage-of-completion accounting. Progress is calculated using recognised project costs relative to estimated total costs.

Its disclosures also highlight the uncertainty involved in forecasting project outcomes. Project revenue and cost estimates are reviewed at least quarterly, and the final profitability of an individual project may differ from the amount previously recognised.

NCC distinguishes these construction contracts from commercial property development, where revenue is normally recognised when the completed property is handed over and control transfers to the buyer. Read NCC's 2025 accounting policies, page 114 and page 115. ³

Comparing YIT and NCC's reported policies

Company and activity	Recognition	Key accounting basis
YIT: construction contracting	Generally over time	Customer controls work in progress; cost-based input method
YIT: Finnish self-developed residential	At a point in time	Completion and transfer of control to the buyer
NCC: construction and civil engineering	Generally over time	Percentage of completion based on project costs
NCC: commercial property development	Normally at a point in time	Completion and handover of the property

Source: YIT Oyj 2025 Financial Statements, pp. 137–138; NCC 2025 Financial Statements, pp. 114–115. Summary of the companies' disclosed accounting policies, not a comparison of their consolidated revenue figures.

Both companies apply IFRS 15, but their disclosures demonstrate why individual contracts and business models matter. Comparing revenue recognition policies without understanding the underlying contract mix could create misleading conclusions about revenue growth or operating performance.

How the cost-to-cost method works under IFRS 15

For performance obligations satisfied over time, the cost-to-cost method is a common way to measure progress in construction projects. It compares eligible costs incurred to date with total expected eligible costs for the performance obligation.

Consider a simplified hypothetical construction contract with a transaction price of EUR 10 million and estimated total costs of EUR 6 million. If EUR 3 million of eligible costs have been incurred, the calculated progress is 50%.

Illustrative calculation	Amount
Transaction price	EUR 10.0m
Estimated total costs	EUR 6.0m
Costs incurred to date	EUR 3.0m
Stage of completion	50%
Cumulative revenue recognised	EUR 5.0m

Illustrative example, not reported company data. Assumes the contract qualifies for over-time recognition and costs accurately depict performance.

But what happens if the estimated total project costs increase from EUR 6 million to EUR 7.5 million while actual eligible costs remain EUR 3 million?

The calculated progress falls to 40%, and cumulative revenue based on the revised estimate becomes EUR 4 million. The EUR 1 million difference illustrates how changes in project cost estimates can affect revenue recognised in the current period.

This is why project forecasting and revenue recognition are closely connected. Changes in total expected costs can affect both the stage of completion and the estimated project margin.

Importantly, not every incurred cost should automatically count toward progress. IFRS 15 requires adjustments where inputs do not accurately depict performance, including certain wasted costs and materials whose cost is disproportionate to progress. ¹

How contract modifications and change orders affect revenue

Construction projects frequently involve additional works, scope changes, claims and performance bonuses. Under IFRS 15, these changes may affect the transaction price, the identification of performance obligations and the revenue already recognised.

When a modification adds distinct goods or services at a price reflecting their stand-alone selling prices, it is accounted for as a separate contract. Other modifications may be accounted for prospectively or through a cumulative catch-up adjustment, depending on whether the remaining goods or services are distinct.

For a modification that becomes part of an existing, partially satisfied performance obligation, the resulting changes in transaction price and progress may require an immediate adjustment to cumulative revenue. ¹

YIT's 2025 accounting policy explains that additional and change works commonly remain part of the original integrated construction contract. NCC's 2025 disclosures discuss the assessment of enforceability and variable consideration associated with change orders and claims. ^{2, 3}

How to research IFRS 15 accounting policies using Clarifo in ChatGPT or Claude

Reading individual annual reports is useful, but comparing accounting policies across multiple companies can become time-consuming. Different companies may use terms such as percentage of completion, cost-to-cost, input method or stage of completion to describe related accounting approaches.

With Clarifo MCP, ChatGPT and Claude can search the underlying company filings, identify relevant accounting disclosures and present the findings with source references.

Step 1: Connect Clarifo to your AI assistant

Start with a Clarifo account and 7-day free trial, or sign in to your existing account.

Then install Clarifo through the ChatGPT plugin directory or Claude's connector directory. Connect your Clarifo account when prompted.

Once connected, you can ask financial research questions in natural language. Clarifo provides the filing retrieval and financial data tools, while your AI assistant organises the results.

Step 2: Compare accounting policies across companies

For example, start with the following prompt:

This workflow begins with the companies' actual accounting policy notes rather than relying on a generic explanation of IFRS 15. It is particularly useful for controllers, auditors and financial analysts reviewing how industry peers apply reporting standards.

Step 3: Investigate differences and supporting disclosures

Once the initial comparison is complete, continue with a more specific question:

This type of follow-up connects the accounting policy to the actual estimates and disclosures behind reported revenue.

The same approach can be extended to additional Nordic construction companies, other reporting periods and different IFRS standards. Users can also explore the underlying reports directly through Clarifo's research platform.

Frequently asked questions about IFRS 15 in construction

Is construction revenue always recognised over time?

No. Under IFRS 15, construction revenue is recognised over time only when at least one of the criteria in paragraph 35 is met. Otherwise, the company recognises revenue when control transfers at a point in time. YIT's 2025 disclosures illustrate both approaches within one construction group.

What is the difference between percentage of completion and cost-to-cost?

Percentage of completion describes the proportion of a performance obligation that has been satisfied. Cost-to-cost is an input method that estimates progress using eligible costs incurred relative to total expected eligible costs. It is one method of measuring progress, not a separate revenue recognition standard.

How do construction change orders affect revenue?

Under IFRS 15, an approved change order can modify the transaction price or the scope of a contract. Depending on the nature of the additional goods or services, the modification may be treated as a separate contract, prospectively or through a cumulative catch-up adjustment.

Why does YIT recognise Finnish residential development revenue on completion?

According to YIT's 2025 financial statements, its Finnish self-developed residential projects do not meet the over-time recognition criteria because of the customer's contractual cancellation rights under applicable legislation. Revenue is therefore recognised when control of the completed apartment transfers to the buyer.

Can ChatGPT or Claude compare IFRS accounting policies from annual reports?

Yes. By connecting Clarifo through MCP, users can ask ChatGPT or Claude to search annual reports, retrieve accounting policy disclosures and compare how companies describe the application of IFRS standards. Clarifo provides access to underlying filings and source references, while the AI assistant presents the comparison. The conclusions should still be reviewed against the original reports.

What finance teams should take away

IFRS 15 construction revenue recognition is ultimately about control, contractual rights and the measurement of performance. YIT and NCC's 2025 reports show how these principles lead to different recognition methods across contracting and property development activities.

For finance teams preparing financial statements or benchmarking peers, the most useful starting point is the original accounting policy disclosure. From there, the analysis should extend to performance obligations, project cost estimates, contract modifications and contract balances.

With Clarifo connected to ChatGPT or Claude, these disclosures can become part of a repeatable, source-linked research workflow. The objective is not to replace accounting judgment, but to make the evidence behind that judgment easier to find, compare and verify.