Treatment of mobilisation cost received from client

Suman Chattopadhyay (Finance Controller) (25 Points)

11 October 2015  

I would like to know the accounting treatment for Mobilisation Costs.


Mobilisation cost is to be paid by the client to the Contractor as per the milestone achievements. The milestone includes acquiring the assets for the project and once the assets are acquired, mobilisation payment will be done which may or may not be equal to the cost of the assets. As the assets are owned by the Contractor, it will be capitalised. Here what is the treatment of the amount received from the Client for this milestone payment in the books of the Contractor?

Further milestone payment also includes keeping the workforce ready for operation, so what will be the treatment of the money received from the Client for keeping the workforce ready.