Under Notice 89-15, which guidance area covers small home and residential construction contracts?

Under Notice 89-15, which guidance area covers small home and residential construction contracts?

• A. Changes in method of accounting
• B. Definition of long term contract
• C. Aggregating and severing contracts
• D. Small home and residential construction contracts

Answer: (D)

Notice 89-15 organizes contract accounting guidance into distinct areas, with one area dedicated specifically to residential work. That area, small home and residential construction contracts, provides the rules and considerations tailored for residential builders handling small projects. It addresses how these contracts are accounted for in terms of income and cost recognition, because their characteristics—shorter duration, smaller scale, typical billing patterns—often differ from larger, long-term commercial contracts. The other topics focus on broader or different issues—changes in accounting methods, what counts as a long-term contract, and how contracts should be aggregated or severed—not on the special treatment for small residential jobs. Thus, the guidance area that covers small home and residential construction contracts is the appropriate choice.

Notice 89-15 organizes contract accounting guidance into distinct areas, with one area dedicated specifically to residential work. That area, small home and residential construction contracts, provides the rules and considerations tailored for residential builders handling small projects. It addresses how these contracts are accounted for in terms of income and cost recognition, because their characteristics—shorter duration, smaller scale, typical billing patterns—often differ from larger, long-term commercial contracts. The other topics focus on broader or different issues—changes in accounting methods, what counts as a long-term contract, and how contracts should be aggregated or severed—not on the special treatment for small residential jobs. Thus, the guidance area that covers small home and residential construction contracts is the appropriate choice.