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Accounting Standard - 7

This query is : Resolved 
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(Querist)
26 March 2009

AS-7 “Construction Contracts”, whether applicable or not, to projects undertaken by the enterprises on its own account as a commercial venture in the nature of production activities?

E.g. House construction by Local Authority or company and after completion sales by draw.
E.g. Flats construction by a Co-operative society for its members.
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CA Siddhartha Bhardwaj

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CA Siddhartha Bhardwaj (Expert)
24 September 2011 AS 7 is not applicable to developers. The reason being that AS 7 defines construcion contract as a contract which is specifically negotiated for the construction of an asset.

The developers do not enter into a construction contract with their buyers. They undertake construction on their own account and later sell the property to the buyers.

They, therefore enter into an agreement for sale.

Therefore, AS 7 is not applicable.
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