Accounting standards
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 April 2012
Brief the AS7 and AS9 and the difference between the two standards
09 April 2012
For accounting of constructon contracts AS 7 is applicable only, & according to AS 7 when the outcome of a construction contract can be measured reliably contract revenue & contract cost associated to such contract should be recognised in the Financial Statements.
So for recognition of revenue from construction contracts AS 7 is there,
AS 9 does not cover the revenue reocgnition from construction contracts. If AS 7 (Revised 20XX) applies: Revenue is recognised on a percentage-of-completion
basis provided that reliable estimates of construction progress and future costs can be
made.
If Exposure Draft of AS 9 (Revised 20XX) applies: The agreement can be for rendering
services and it can be for sale of goods. If the entity is not required to acquire and supply
construction materials, it is an agreement for rendering services. If the entity is required
to provide services together with construction materials in order to perform its
contractual obligation to deliver real estate to the buyer, the agreement is accounted for
as the sale of goods as per the Exposure Draft AS 9 (Revised 20XX).
Likely impact of the proposed Appendix C of the Exposure Draft of AS 9 (Revised 20XX)
when an agreement is treated as agreement for sale of goods, is the deferment of
revenue recognition as construction progresses to the point of time of completion of the agreement
So for recognition of revenue from construction contracts AS 7 is there,
AS 9 does not cover the revenue reocgnition from construction contracts. If AS 7 (Revised 20XX) applies: Revenue is recognised on a percentage-of-completion
basis provided that reliable estimates of construction progress and future costs can be
made.
If Exposure Draft of AS 9 (Revised 20XX) applies: The agreement can be for rendering
services and it can be for sale of goods. If the entity is not required to acquire and supply
construction materials, it is an agreement for rendering services. If the entity is required
to provide services together with construction materials in order to perform its
contractual obligation to deliver real estate to the buyer, the agreement is accounted for
as the sale of goods as per the Exposure Draft AS 9 (Revised 20XX).
Likely impact of the proposed Appendix C of the Exposure Draft of AS 9 (Revised 20XX)
when an agreement is treated as agreement for sale of goods, is the deferment of
revenue recognition as construction progresses to the point of time of completion of the agreement
Querist : Anonymous
Querist :
Anonymous
(Querist)
14 April 2012
thank you sir
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