New interpretations on construction contracts

Recently, the International Accounting Standards Board (IASB) issued two IFRIC (International Financial Reporting Interpretations Committee) interpretations that seek to clarify accounting treatments for two critical areas of accounting — construction contracts and net investment in a foreign operation with effect from January 1, 2009. IFRIC 15 standardises accounting practice across jurisdictions for the recognition of revenue by real-estate developers for sales of units, such as apartments or houses, ‘off plan’ — that is, before construction is complete. The fundamental issue is whether the developer is selling a product (goods) — the completed apartment or house — or a service — a construction service as a contractor engaged by the buyer.