I have a doubt regarding the application of Accounting Standards for a supply and installation company..
The said Company is a supplier and system integrator of Electronic Security Solutions.
95% of the projects undertaken by the company have the period of 4-7 months. But,one of their project (currently running) is of 2 to 2.5 yrs of period to complete.
$ My doubt is:
Which Accounting Standard is applicable for them to recognize the revenue during the FY 2011-12. whether it is AS 7 or AS 9?
can they use AS 9 for small projects and AS 7 for their big project during the same FY?
25 July 2012
Dear Sir, i read the AS 7 and it says that an activity is considered as construction contract only if it "creates an Asset". If it dosnt creates a asset, revenue should be recognised by applying AS 9.(as normal Sales and Installation income)
##Supply and installation of electronic security equipment's to a customers site, ultimately results in a value addition to their total assets and which can be shown as (fixtures) in their B\S.##
In this case, Can i go forward by using AS 7 for recognising the Revenue.
This business of suppling and installing Electronic security systems like CCTV,Fire alarms, acces controls etc. They have 18 projects running over the FY. Among these 18 projects, except one all other projects take a period 0f 4-6 months to complete. But one project which is the biggest need 2- 2nd half yrs to complete...
Rite now for the revenue recognition:
Small projects (17 Nos): they follow AS 9. Biggest Project (1 No): they follow AS 7.
##Doubt:
which is the AS they should ue for revenue recognition. (AS 7 or AS 9)??
25 July 2012
It seems that AS 7 is not applicable to your business.
As i read big projects and small projects, they are big orders in terms of quantity for installation.
In this case, the entity should follow manufacturing equipments policy and recognise revenue as and when the particular equipments are installed and risk & rewards transferred to buyer.
The case seems to be more of AS 9 irrespective of its scale of business.
CAclubindia
