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Accounting Standard Applicability

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Rakesh

Self-employed

35 Points Posted on 25 February 2021

Hello,

My client has a query regarding applicability of Accounting Standard. The Client is into installation of Heating, Ventilation, Central Air Conditioning along with installation of Electricals, Fire and Plumbing as the project requires. The query is whether AS-7 Construction Contract or AS-9 Revenue recognition applies for them. I am getting mixed responses on this. It will helpful if i can get any advice on the applicability and any case law if possible as well.

Thanks in advance

Replies (6)

Quick Summary

This discussion explores whether Accounting Standard 7 (Construction Contracts) or Accounting Standard 9 (Revenue Recognition) applies to a client involved in installing HVAC, electrical, fire, and plumbing systems. While some suggest both apply, the consensus leans towards AS-9, as the client's work involves assembling components rather than constructing an asset, positioning them as a service provider rather than a constructor under AS-7.

CA. Sourav Sarkar

Chartered Accountant

24588 Points Posted on 25 February 2021

As-9 and As-7 both required as revenue should be recognised when it is duly received and as client is working on projects including construction contracts so AS-7 will be applicable on revenue to be recognised on stage wise basis or on completion of project basis

Rakesh

Self-employed

35 Points Posted on 25 February 2021

Hi,

Thank you for the reply. AS-9 specifically excludes those who fall under the purview of AS-7. Only one AS can apply in this situation. I need to know whether the business activity carried out by my client falls under the recognition of AS-7.

CA. Sourav Sarkar

Chartered Accountant

24588 Points Posted on 25 February 2021

Actually you are correct you should apply As-7 as revenue already recognises

Rakesh

Self-employed

35 Points Posted on 25 February 2021

AS-7 mentions of construction of asset or group of asset or services related to construction of asset. In this case they are not constructing anything, only buy the parts and assembling it in the building and hence the confusion.