If construction projects undertaken by the enterprise on its own account and selling of these self-constructed residential unit/ commercial flats to the public then AS-7 would apply or Not? or if Not Then how can recognised revenue? Thank you.
16 April 2012
Dear Mr. Nitin, If the builder constructs the property on his own then AS- 7 will not apply.
As per Guidance Note on Recognition of Revenue by Real Estate Developers issued recently by ICAI-
The builder should apply percentage of completion method, where it is appropriate to apply this method, i.e., where such transactions and activities of real estate have the same economic substance as construction contracts. In respect of transactions of real estate which are in substance similar to delivery of goods, principles enunciated in Accounting Standard (AS) 9, Revenue Recognition, are appllied but the method for recognition will be similer to AS-7 even though AS- 7 is not applicable.
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