How to calculate percent complete and period revenue
A step-by-step guide to the cost-to-cost method: percent complete, earned revenue, and the revenue you recognize this period - plus how to handle a changed estimate.
The cost-to-cost formula
The cost-to-cost method measures progress by the share of total estimated cost you’ve already incurred. It’s the most defensible progress measure because it’s tied to real spending, not a subjective judgment of how "done" a job feels.
Percent complete and earned revenue
percent_complete = cost_to_date ÷ EAC; earned_revenue = percent_complete × contract_value
EAC (estimate at completion) is cost-to-date plus cost-to-complete. Contract value is the original contract plus approved change orders.
A worked example
Period revenue
period_revenue = earned_to_date − previously_recognized = $300,000 − $252,000 = $48,000
Recognizing the delta keeps cumulative revenue equal to earned-to-date, so estimate changes self-correct.
Handling a changed estimate
When costs run high and you raise the estimate at completion, percent complete falls even though spending rose. Because period revenue is earned-to-date minus previously recognized, you may book a smaller - or even negative - amount this period to true up. That catch-up is a feature, not an error: it keeps cumulative revenue honest.
- Raising EAC lowers percent complete and defers revenue.
- Lowering EAC raises percent complete and accelerates revenue.
- Only approved change orders move the contract value in the numerator of earned revenue.
How Fintra automates it
Fintra computes percent complete, earned revenue, and period revenue on each revenue-recognition run and posts a balanced journal entry - including the catch-up when an estimate changes. You review the numbers instead of maintaining a POC spreadsheet.
Frequently asked questions
How do you calculate percentage of completion?
Divide costs incurred to date by the total estimated cost (the estimate at completion) to get percent complete under the cost-to-cost method. Multiply that percentage by the contract value to get earned revenue, and subtract previously recognized revenue to get the amount to recognize this period.
What is the cost-to-cost method?
Cost-to-cost is a way of measuring progress on a long-term contract by comparing costs incurred to total estimated costs. It’s the most common input method under ASC 606 because it ties revenue recognition to actual spending rather than a subjective completion estimate.
What happens to revenue if my estimate goes up?
Raising the estimate at completion lowers percent complete, so cumulative earned revenue drops. Because you recognize earned-to-date minus previously recognized, the current period books a smaller or negative amount to true up - keeping total revenue aligned with the new estimate.
Do change orders change the calculation?
Yes, once approved. Earned revenue is percent complete times the current contract value, which is the original contract plus approved change orders. Pending change orders are excluded until signed off, so revenue never runs ahead of agreed scope.
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