04-22-2010, 04:47 AM
I would like to know the accounting treatment of cashing in a performance bond based on terms of contract in case of default.
The current contractor has defaulted the contract and has been kicked out therefore the organization has cashed it's performance bond. The contract states that in case of default the contractor is obliged to cover all the costs incurred to complete the project and the organization has the right to appoint a new contractor to complete the project. Therefore should the performance bond be treated as revenue or as reimbursement to the project in order to cover for any deficit?
The current contractor has defaulted the contract and has been kicked out therefore the organization has cashed it's performance bond. The contract states that in case of default the contractor is obliged to cover all the costs incurred to complete the project and the organization has the right to appoint a new contractor to complete the project. Therefore should the performance bond be treated as revenue or as reimbursement to the project in order to cover for any deficit?
