Thursday, 1 March 2012
New Accounting Rules for Real Estate
Real estate companies and companies involved in carbon trading will have to change the way they recognize revenues and it's all thanks to a new guidance note issued by the Institute Of Chartered Accountants In India. Payaswini Upadhyay reports
In a move to reduce the disparate practices of revenue recognition by real estate companies, ICAI has issued a guidance note identifying threshold limits when revenues from projects can be recognized.
These thresholds are:
1. when all critical regulatory approvals are secured
2. when 25% of the project is completed
3. when 25% of the project's inventory is sold and
4. when at least 10% of the expected revenue is received.
This is in sharp contrast to the current practice, where revenue recognition differs from company to company and experts say this will mean a change in valuations and quarterly profit statements.
In a move to reduce the disparate practices of revenue recognition by real estate companies, ICAI has issued a guidance note identifying threshold limits when revenues from projects can be recognized.
These thresholds are:
1. when all critical regulatory approvals are secured
2. when 25% of the project is completed
3. when 25% of the project's inventory is sold and
4. when at least 10% of the expected revenue is received.
This is in sharp contrast to the current practice, where revenue recognition differs from company to company and experts say this will mean a change in valuations and quarterly profit statements.
