AS7 - Accounting for Construction Contracts
This query is : Resolved
03 February 2009
I recently read somewhere that AS7 (% completion method) is not mandatorily applicable to construction companies who develop housing/commercial on its own account and then sell to public. In other words these construction companies are not bound to compulsorily follow % completion method. Is it true?
Is AS7 applicable only to contractors who undertake construction contract for their clients.
Is AS7 applicable only to contractors who undertake construction contract for their clients.
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.
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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