Earned value

sound basis for revenue recognition

The accounting and investment communities depend upon dependable ways to recognize revenues for projects. Traditionally, revenue calculations for projects are measured as a percentage of 'progress-to-completion.' This article introduces the earned value concept as a method for measuring project progress and performance. An earned value system consists of three steps: 1) defining the project's total scope; 2) preparing a schedule of activities; and 3) allocating the budget to these activities. Actual Cost of Work Performed (ACWP) can be compared with Budgeted Cost of Work Performed (BCWP) to assess project progress and performance. Earned value system requirements include the need to enlist the entire project team's support in providing the necessary data, and the need for dedicated staff to operate the system.
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