Percentage-of-completion (POC) revenue recognition applies to long-term contracts in construction, engineering and professional services, recognising revenue progressively as work is performed rather than at delivery. Under IFRS 15, POC applies when the customer controls the asset as it is created. In financial due diligence, the reliability of completion estimates and cost-to-complete projections is a critical audit point: over-estimated completion percentages artificially inflate recognised revenue and EBITDA, potentially masking losses to completion.

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Example: a Swiss civil engineering company recognises CHF 6.5 million of POC revenue on a CHF 10.0 million contract. Due diligence technical review reveals actual completion of 58% versus 65% booked — reducing recognised revenue by CHF 700,000 and uncovering an unprovisioned loss to completion of CHF 400,000. This CHF 1.1 million combined adjustment reduces normalised EBITDA and directly impacts the acquisition price.

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Hectelion reviews POC estimates and cost-to-complete projections with independent technical input in every due diligence involving long-term contract companies.