Have you ever thought about how real estate companies book their revenues and how that translates into profit and loss statements?
We discovered that the profitability and sales numbers are different!
#LearningwithIT
Let's take a look!
Thread 🧵
We discovered that the profitability and sales numbers are different!
#LearningwithIT
Let's take a look!
Thread 🧵
Imagine that you are a real estate developer who has just completed the construction of a residential building.
You want to sell the units in the building, but you need to recognize the revenue from these sales in your financial statements in a way that is consistent with accounting principles.
Revenue recognition in the real estate sector can be complex, but there are a few key principles that guide the process. One of these principles is the concept of "completion."
In case of real estate, project initiation, construction to final delivery can take 2-3 yrs
Thus, how should real estate companies notify exchanges of their sales?
Percentage of Completion approach up until FY18
In accordance with this, income was recorded when actual construction and development costs (excluding land costs) exceeded estimates by 25% or more.
Percentage of Completion approach up until FY18
In accordance with this, income was recorded when actual construction and development costs (excluding land costs) exceeded estimates by 25% or more.
or
Contracts with buyers secured at least 25% of the saleable project area, and at least 10% of the total revenue as per sales agreement was realised as of the reporting date.
For more refer image :-
Contracts with buyers secured at least 25% of the saleable project area, and at least 10% of the total revenue as per sales agreement was realised as of the reporting date.
For more refer image :-
POCM, on the other hand, was subjected to extensive manipulation.
Furthermore, many projects went unfinished while the companies reported sales.
MCA notified Ind AS 115, revenue from a contract with Customers, on March 28, 2018, with effect from April 1, 2018.
Furthermore, many projects went unfinished while the companies reported sales.
MCA notified Ind AS 115, revenue from a contract with Customers, on March 28, 2018, with effect from April 1, 2018.
Real estate companies began reporting sales using the Completed Contract Method (CCM) as of FY 19 as a result.
In accordance with the same, contract revenue is recorded as soon as the customer has control over the property.
In accordance with the same, contract revenue is recorded as soon as the customer has control over the property.
Inside ghux
revenue is recognised when:
All important risks and benefits of ownership have been passed to the client by the company, and the company no longer has any meaningful control over the real estate unit to the extent that is often associated with ownership.
revenue is recognised when:
All important risks and benefits of ownership have been passed to the client by the company, and the company no longer has any meaningful control over the real estate unit to the extent that is often associated with ownership.
figures are shared by enterprises due to the lengthy (2–3 year) period between the customer booking the apartment and the actual delivery.
- Sales of bookings (worth of flats booked)
- Reporting of sales (as per CCM)
- the collections (amount collected)
- Sales of bookings (worth of flats booked)
- Reporting of sales (as per CCM)
- the collections (amount collected)
• • •
Missing some Tweet in this thread? You can try to
force a refresh
