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
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.
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