Earnings reserve

The difference arising between the overall costs of the construction work performed and its valuation at cost of manufacture is referred to as the earnings reserve. A reserve is thus built up over the course of the project and is then realized as earnings upon the acceptance of the project. The lower the costs of manufacture stated by a company within the legally permissible range are, then the higher the earnings reserve will be. An increase in the volume of construction work not yet settled results in an increase in the earnings reserve. When the work is invoiced, this then impacts on the balance sheet profit.