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RECOGNITION OF REVENUE FOR REAL ESTATE DEVELOPER

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RISHI JHAJHARIA

22 Points Posted on 09 December 2022

Dear All

In real estate we follow some accounting standards like AS 7 ( construction contracts) and AS9 (Revenue recognition) and on the basis of that we record sales and its direct expenses... So for example if a buyer pays us 15 % of the total amount in the year in which development agreement was signed and also it is reflecting on 26 AS so my question is why are we including it as a part of turnover in that year even though AS7 and AS9 is not fulfilled?

Replies (2)

Quick Summary

This discussion explores the proper recognition of revenue for real estate developers, focusing on accounting standards AS7 (Construction Contracts) and AS9 (Revenue Recognition). It questions why payments received, even if reflected in tax documents like 26AS, are sometimes included in turnover before the conditions of AS7 and AS9 are met. The point is made that capitalised development costs should not be recognised as revenue, highlighting potential accounting errors if this distinction is blurred.

Yasaswi Gomes new

Finance

3326 Points Posted on 09 December 2022

As 26 is not covering as7 or as 9. Some Development costs are capitalised and they dont use construction contracts methods. Only the cost is reliably measured and when there is a benefit from the cost, its made an asset. If the same amount is shown as revenue tnen there is an accounting error. Revenues are from operations and capital expenses are capitalised but not recognised as revenues.

sabyasachi mukherjee

Profession

19978 Points Posted on 09 December 2022

There are some issues relating to construction contract. AS7 OR AS9.THESE ARE MAIN ISSUES INVOĹVED.
COST PLUS CONTRACT
PROPORTIONATE METHOD
OR OTHERS.