Aplication of AS-7

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JOYAL GEORGE (Querist)
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18 December 2009 Sir,
Whether AS-7 is applicable only for civil contractors? Or it is applicable for contracts other than civil contractors?

If it is not applicable to contractors other than civil contractors, where it is mentioned in AS-7?

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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18 December 2009 AS - 7 is applicable for Construction Contracts. It includes construction of bridge, building, dam, pipeline, road etc.

It also includes rendering of services which are "directly" related to the "construction of assets, for example service of architect.

It also includes destruction or restoration of asset and the restoration of the environment following the demolition of asset.

From the above; it is clear that this AS is related to civil construction.

Read the provisions carefully and you will find that whole "construction Contracts- AS-7" is surrounding thereon.

Can you say that I am constructing a machine ?

CA Rakhecha,Surat

Murtaza I Bhagat

Murtaza I Bhagat (Expert)
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18 December 2009 A construction contract may be negotiated for the construction of a
single asset such as a bridge, building, dam, pipeline, road, ship or tunnel. A
construction contract may also deal with the construction of a number of
assetswhich are closely interrelated or interdependent in terms of their design,
technology and function or their ultimate purpose or use; examples of such
contracts include those for the construction of refineries and other complex
pieces of plant or equipment
For the purposes of this Statement, construction contracts include:
(a) contracts for the rendering of services which are directly related
Construction Contracts 111
to the construction of the asset, for example, those for the services
of project managers and architects; and
(b) contracts for destruction or restoration of assets, and the restoration
of the environment following the demolition of assets.
5. Construction contracts are formulated in a number of ways which, for
the purposes of this Statement, are classified as fixed price contracts and
cost plus contracts. Some construction contractsmay contain characteristics
of both a fixed price contract and a cost plus contract, for example, in the
case of a cost plus contract with an agreed maximum price. In such
circumstances, a contractor needs to consider all the conditions in paragraphs
22 and 23 in order to determine when to recognise contract revenue and
expenses.

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