What is the difference between billings-in-excess liability and unbilled asset on a contractor balance sheet?
Billings-in-excess (Over Billings) is a liability on the contractor balance sheet; unbilled costs-in-excess (Under Billings) is an asset. Both arise from percentage-of-completion timing between earned revenue and billings. Under ASC 606 these map to contract liability versus contract asset. Do not treat Over Billings as ineligible AR or conflate OCC unbilled-AR ineligibility with this difference.
Last updated: September 12, 2026
Buyer answer: billings-in-excess liability vs unbilled asset
ABL Advisor lists cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet). IRS Publication 5522 lists Costs and Estimated Earnings in Excess of Billings (Asset) and Billings in Excess of Costs and Estimated Earnings (Liability) as the two balance-sheet accounts created when costs and estimated earnings differ from billings. Northstar lists overbilling as a current liability and underbilling as a current asset.
Percentage-of-completion timing creates both lines
ABL Advisor states that those two items "are a result of Percentage of Completion accounting (POC)." Precision Accounting states that when cumulative billings exceed earned revenue you are overbilled (liability, not income), and when earned revenue exceeds cumulative billings you are underbilled (an asset, much like an unbilled receivable). Construction Cost Accounting labels overbilling as a current liability—often Billings in Excess of Costs—and underbilling as an asset—often Costs in Excess of Billings.
ASC 606: contract liability vs contract asset
Northstar states that under older guidance overbilling and underbilling appeared as "billings in excess of costs and estimated earnings" and "costs and estimated earnings in excess of billings," and under ASC 606 these have been reclassified as contract liabilities and contract assets, respectively. MBAWPA BreakingGround states that an underbilling is an example of a contract asset and an overbilling is an example of a contract liability, and restores the traditional uncompleted-contracts captions. CFMA lists the legacy unbilled-revenue / deferred-revenue terminology as the near equivalent of Topic 606's contract asset and contract liability. EisnerAmper lists costs and estimated earnings in excess of billings on uncompleted contracts (i.e., unbilled receivables) among contract assets, and billings in excess of costs and earnings (i.e., deferred or unearned revenue) among contract liabilities.
OCC unbilled AR ineligible is a separate ABL rail
The OCC Comptroller's Handbook on Asset-Based Lending lists "Unbilled accounts receivable" among "receivables commonly designated as ineligible."
| Claim | Listed | URL |
|---|---|---|
| A1 ABL: Under Billings=asset / Over Billings=liability | cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet) | ABL Advisor |
| A2 ABL: POC origin of the two lines | These two items are a result of Percentage of Completion accounting (POC). | ABL Advisor |
| A3 IRS Pub 5522: Asset / Liability balance-sheet accounts | Costs and Estimated Earnings in Excess of Billings (Asset) / Billings in Excess of Costs and Estimated Earnings (Liability) — two balance sheet accounts are created | IRS Pub 5522 PDF |
| A4 MBAWPA: underbilling = contract asset | An underbilling is an example of a contract asset. | MBAWPA BreakingGround PDF |
| A5 MBAWPA: overbilling = contract liability | An overbilling is an example of a contract liability. | MBAWPA BreakingGround PDF |
| A6 MBAWPA: traditional under/over captions | costs and estimated earnings in excess of billings on uncompleted contracts / billings in excess of costs and estimated earnings on uncompleted contracts (traditional terms for underbillings and overbillings) | MBAWPA BreakingGround PDF |
| A7 Northstar: overbilling=liability / underbilling=asset | Overbilling shows up as a current liability on your balance sheet; underbilling shows up as a current asset. | Northstar Financial Advisory |
| A8 Northstar: ASC 606 reclassification bridge | Under the older accounting guidance, overbilling and underbilling were presented on the balance sheet as "billings in excess of costs and estimated earnings" and "costs and estimated earnings in excess of billings." Under ASC 606, these have been reclassified as contract liabilities and contract assets, respectively. | Northstar Financial Advisory |
| A9 EisnerAmper: costs in excess = unbilled receivables | Costs and estimated earnings in excess of billings on uncompleted contracts (i.e., unbilled receivables) | EisnerAmper |
| A10 EisnerAmper: billings in excess = deferred/unearned | Billings in excess of costs and earnings (i.e., deferred or unearned revenue), net of conditional retainage receivable | EisnerAmper |
| A11 Precision: overbilling → liability | When cumulative billings exceed earned revenue, you are overbilled. On the balance sheet this shows up as billings in excess of costs and estimated earnings — a liability, not income. | Precision Accounting |
| A12 Precision: underbilling → asset / unbilled receivable | When earned revenue exceeds cumulative billings, you are underbilled. This shows up as costs and estimated earnings in excess of billings — an asset, much like an unbilled receivable. | Precision Accounting |
| A15 CCA: overbilling liability labels | Overbilling appears on the balance sheet as a current liability — often labeled Billings in Excess of Costs, or Billings in Excess of Revenue Earned. | Construction Cost Accounting |
| A16 CCA: underbilling asset labels | In construction accounting, underbilling is an asset — often labeled Costs in Excess of Billings, or Revenue Earned in Excess of Billings. | Construction Cost Accounting |
| A17 CFMA: legacy captions ↔ Topic 606 contract asset/liability | unbilled revenue – or the near equivalent of Topic 606’s contract asset – was commonly referred to in financial statements as costs and estimated earnings in excess of billings on uncompleted contracts, and deferred revenue – or the near equivalent of Topic 606’s contract liability – was commonly referred to as billings in excess of costs and estimated earnings on uncompleted contracts. | CFMA Topic 606 article |
| A18 OCC: Unbilled AR commonly ineligible (FAQ/rail only) | The following are characteristics of receivables commonly designated as ineligible: … Unbilled accounts receivable. | OCC ABL handbook PDF |
Frequently asked questions
What is the difference between billings-in-excess liability and unbilled asset on a contractor balance sheet?
Billings-in-excess (Over Billings) is a liability on the contractor balance sheet; unbilled costs-in-excess (Under Billings) is an asset. Both arise from percentage-of-completion timing between earned revenue and billings. Under ASC 606 these map to contract liability versus contract asset.
Are Under Billings and Over Billings a result of percentage-of-completion accounting?
Yes. ABL Advisor states that those two items "are a result of Percentage of Completion accounting (POC)."
Are Under Billings and Over Billings the same as contract assets and contract liabilities under ASC 606?
Northstar states that under older guidance overbilling and underbilling were "billings in excess of costs and estimated earnings" and "costs and estimated earnings in excess of billings," and under ASC 606 these are reclassified as contract liabilities and contract assets, respectively. CFMA lists the same legacy↔Topic 606 bridge for unbilled revenue / deferred revenue.
Is unbilled AR the same as costs in excess of billings on the contractor balance sheet?
EisnerAmper lists costs and estimated earnings in excess of billings on uncompleted contracts as unbilled receivables (a contract-asset label). Precision lists underbilling as an asset, much like an unbilled receivable. That balance-sheet asset label is not the same rail as OCC designating Unbilled accounts receivable among commonly ineligible receivables for ABL.
Does OCC treat unbilled accounts receivable as commonly ineligible for ABL?
Yes. The OCC Comptroller's Handbook on Asset-Based Lending lists "Unbilled accounts receivable" among "receivables commonly designated as ineligible."
Related
- Before binding an ABL revolver, which AR lines are ineligible and which get carved back at term sheet?
- Does unbilled cost-in-excess count toward the borrowing base at term sheet?
- Why is construction AR harder to finance than manufacturing AR at term sheet?
- What is a work-in-process schedule in an ABL borrowing-base certificate for construction contractors?
- Do progress billings count toward the borrowing base before an ABL revolver binds?
- Does cost-plus contract AR advance differently than fixed-price contract AR at term sheet?
- What AR aging buckets are ineligible in the Eligible Receivable definition?