PROPERTY DEVELOPMENT ACTIVITIES MASB 32/MFRS 201-PART 3

DETERMINATION OF STAGE OF COMPLETION

Determination may be based on:-

u The proportion that property development cost incurred for work performed to date bear to the estimated total property development costs;

u Surveys of work performed; or

u Completion of a physical proportion of the property development cost.

                i.e. physical work completed as a percent of total physical work of project.

•       When stage of completion determined using proportion cost incurred to date, only property development cost that reflect work performed are included. The following cost do not relate to work performed;

                - cost of land

                - financing cost capitalised

                - advance payment made to contractor

LIQUIDATED ASCERTAINED DAMAGE (LAD)

•       LAD receivable from contractor for late completion and LAD payable to customer for late delivery shall disclose as gross amount in income statement.

•       Journal entry for LAD payable to customer

•       Dt  LAD expenses             xxx

 Kt Provision for LAD ( Balance sheet)     xxx

BORROWING COST

•       Interest on borrowing allowed to be capitalised only if the activities necessary to prepare the property for its intended use or sale are in progress

•       Capitalised must be cease if project has been suspended or if no development activity is being carried on

INVENTORIES

l  Inventories of unsold completed development units shall be stated at the lower of cost and net realisable value

l  Unsold units retained by the entity are accounted for in accordance with MFRS 102/ MASB 2 Inventories, MFRS 116/MASB 15 Property, plant and equipment or MFRS 140 Investment Property/MASB Approved IAS 25 Accounting for Investment

Summarised costs journals required to apply the principle of MASB 32:-

1) When cost are allocated to or incurred in                         project :

                  Dr                         Property development project account

                                                Cr            Land held for development account

                                                Cr            Cash/ Creditors/ Depreciation/

                                                Provision, etc

2)When customers/buyers are billed for progress            billings:

Dr           Accounts receivable

                                Cr            Progress billing account

3) At the end of a period, when revenue and   

    costs are recognised based on the stage of  

    completion:

   Dr Progress billings account

         Cr Project revenue in the income statement

   Dr Project as an expense in the income statement

         Cr Project costs as an expense in the balance sheet