PROPERTY DEVELOPMENT ACTIVITIES MASB 32/MFRS 201-PART 1

DEFINITIONS

Activities involving the necessary steps to plan and construct, and comply with statutory and contractual requirements in the development of land into vacant lots, residential, commercial and/or industrial buildings [MASB 32(5)]/MFRS 201

Apply to entities engaged in property development activities including those governed by the Housing Development (Control and Licensing) Act, 1966.

OBJECTIVE

l  To understand the specialised nature and the features of property development activities;

l  To understand in detail the requirement of MASB 32, Property Development Activities;

l  To deal with the recognition and measurement of property development activities; and

l  To deal with the presentation and disclosure of property development activities

NATURE OF ACTIVITIES

•       Acquiring land for the purpose of development

•       -Construct & Selling completed residential

•       -Development of vacant lot for sale

LAND HELD FOR
PROPERTY DEVELOPMENT

Criteria

l  Classified as non current asset

l  Carried at cost less any accumulated impairment losses.

l  Not subject to systematic amortisation

l  Reclassified to property development cost (current asset) as and when development activities commence

PROPERTY DEVELOPMENT REVENUE 

Comprise

ü  Selling price in sale and purchase agreement

ü  Any changes due to variation in development work (VO)

Criteria for Revenue Recognition

ü  When sale of the development unit is effected (The individual sale and purchase agreement has been signed)‏

ü  Development and construction activities have begun; and

ü  When financial outcome of the development activities can be reliably estimated

ü  When the outcome of a development activity cannot be reliably estimated:-

ü  Property development revenue shall be recognised only to the extent of property development costs incurred that is probable will be recoverable

ü  Property development costs on the development unit sold shall be recognised as an expense in the period in which they are incurred

ü  Any expected loss on a development project shall be recognised as an expenses immediately (including costs to be incurred over the defects liability period)

Financial outcome of a development activity can be reliably estimated when all of the following conditions are satisfied

         i.            Total revenue from development activities can be measured reliably

       ii.            Probable that the economic benefits associated with the development project will flow the enterprise

      iii.            Both costs to complete and stages of completion can be    measured reliably

     iv.            Costs attributable to the development activities can be                  clearly identified and measured reliably so that actual development costs can be compared with previous year.