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
