Revenue recognition policy

Dear

Kindly go thro' AS 7 & you will get the result  clearly.

As per Accounting Standard 9 "Revenue Recognition"

The term "Real Estate" refers to Land as well as Building. RR in case of Real Estate sales by enterprises (include real estate developers, builders or property developers).

Conditions:-

1. The seller has transferred all significant risk; rewards of ownership to the buyer & seller have no effective control over the real estate.

2. At the time of transfer, there r no unreasonable to expect ultimate collection &

3. No significant uncertainty exists to receive consideration

If 3 conditions are satisfied, revenue is recognized by applying the % of completion method as per AS-7 "Construction of Contract".

If any uncertainty exists, according to AS-9, revenue recognition is postponed to the extent of uncertainty involved. Revenue is recognized when no uncertainty exists.

For Construction Contracts;

Construction Contract means "a contract to develop/promote an asset on other's property". For eg) Promoting Building on contractee's land.

For Construction contracts revenue shall be recognised on percentage of completion basis as per AS-7. Under percentage of completion method, revenue shall be recognised to the extent of work completed. 

For Construction on Own account;

It means a person owns a land, promotes the building and sells the same to the buyers after promoted. This type will be considered as Transaction of sale

Under this type, revenue shall be recognised as per AS-9.  As per AS-9, revenue from sale transaction shall be recognised only when the risk and rewards associated with the property has been transfered and there is no significant uncertainity about the measurability and collectability of consideration. i.e) revenue may be recognised as soon as sale deed is created or agreement of sale entered and substantial consideration is received