... Agreements for the Construction of Real Estate IFRIC 15 Agreements for the Construction of Real Estate was developed by the International Financial Reporting Interpretations Committee and issued by the International Accounting Standards Board in July 2008. Its effective date is 1 January 2009. © IFRS Foundation A1129 IFRIC 15 CONTENTS paragraphs IFRIC INTERPRETATION 15 AGREEMENTS FOR THE CONSTRUCTION OF REAL ESTATE REFERENCES BACKGROUND SCOPE ISSUES CONSENSUS Determining whether the agreement is within the scope of IAS 11 or IAS 18 Accounting for revenue from the construction of real estate Disclosures AMENDMENT TO THE ILLUSTRATIVE EXAMPLES ACCOMPANYING IAS 18 EFFECTIVE DATE AND TRANSITION 1–3 4–5 6 7–21 10–12 13–19 20–21 22–23 24–25 FOR THE ACCOMPANYING DOCUMENTS LISTED BELOW, SEE PART B OF THIS EDITION INFORMATION NOTE Analysis of a single agreement for the construction of real estate ILLUSTRATIVE EXAMPLES BASIS FOR CONCLUSIONS A1130 © IFRS Foundation IFRIC 15 IFRIC Interpretation 15 Agreements for the Construction of Real Estate (IFRIC 15) is set out in paragraphs 1–25. IFRIC 15 is accompanied by an information note, illustrative examples and a Basis for Conclusions. The scope and authority of Interpretations are set out in paragraphs 2 and 7–16 of the Preface to International Financial Reporting Standards. © IFRS Foundation A1131 IFRIC 15 IFRIC Interpretation 15 Agreements for the Construction of Real Estate References ...
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...“Why is accounting for construction contracts and for leases often perceived to be contentious, difficult and a source of opportunity for the manipulation of financial statements. To what extent do IAS 11 and IAS 17 resolve these issues? What can you tell us about any anticipated changes to International Accounting Standards in respect of construction contracts and leases and about how such changes may impact upon Brick to Brick PLC?” In order to explore the reasons companies distort their financial statements, we would first need to understand the importance of financial statements and why the utmost care needs to be observed when preparing them. Financial statements are official records of the financial activities and position of a business or other entities. These statements should be presented at the end of each financial year by the board of directors in a structured manner and should be easy to understand as the statements will be incremental to decision making. Statement of Financial position and Income statements are examples of financial statements. Having accurate statements serves to signal future performance by indicating how the firm might perform over the next financial year. It also helps to monitor budgets, revealing how much wiggle room the company has so they don’t end up making losses and most importantly, financial statements are released to the general public especially potential investors and shareholders. Often, preparers of these statements distort...
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...examples, extracts from company reports and model financial statements. IFRS 3R: Impact on earnings – the crucial Q&A for decision-makers Guide aimed at finance directors, financial controllers and deal-makers, providing background to the standard, impact on the financial statements and controls, and summary differences with US GAAP. IFRS disclosure checklist 2008 Outlines the disclosures required by all IFRSs published up to October 2008. A practical guide to new IFRSs for 2009 40-page guide providing high-level outline of the key requirements of new IFRSs effective in 2009, in question and answer format. A practical guide to capitalisation of borrowing costs Guidance in question and answer format addressing the challenges of applyiing IAS 23R, including how to treat specific versus general borrowings, when to start capitalisation and whether the scope exemptions are mandatory or optional. A practical guide to segment reporting Provides an overview of the key requirements of IFRS 8, ‘Operating Segments’ and some points to consider as entities prepare for the application of this standard for the first time. Includes a question and answer section. Also available: Eight-page flyer on high level management issues. A practical guide to share-based payments Answers the questions we have been asked by entities and includes practical examples to help management draw similarities between the requirements in the standard and their own share-based payment arrangements. November 2008. Adopting...
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...Reporting Standards (IFRS) mainly IAS 11 "Construction contracts" and IAS 18 "Revenue". ASB´s main revenue recognition methods are contract accounting, general revenue recognition and service revenue recognition methods. Basic Revenue Recognition Criteria Revenue can be recognized for majority of ASB sales (regardless of revenue recognition methods) when all the following criteria have been met: 1. A contract is in place (binding obligation) 2. Delivery has occurred: a. IAS 11 (contract accounting); delivery has occurred and services performed according to the contract delivery terms, b. IAS 18 (general revenue recognition); the significant risks and rewards of ownership (as defined in the contract) have transferred to the customer. 3. Continuing managerial involvement usually associated with ownership and effective control have ceased, 4. The amount of revenue can be measured reliably (the fee is fixed or determinable), 5. It is probable that economic benefits associated with the transaction will flow to ASB (collectibility is probable) and 6. The costs incurred or to be incurred in respect of the transaction can be measured reliably. A) Contract Accounting (IAS 11) Significant portion of ASB revenue is recognized in accordance with contract accounting principles. The revenue recognition rules for contract accounting are stated in IAS 11 "Construction contracts". In accordance with contract accounting rules, the sales and cost of sales from contracts involving solutions achieved...
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...Overview PPBJ is a privately-owned company and their main operating activity is to build theatres and concert halls. On Jan 1st, 2010 they signed a contract of an amphitheatre, which will be finished at the end of 2012. The price of 10.5 million dollars is assigned to the contract. We, as their auditors, are asked by a company partner, to identify and analyze several accounting issues relating to this project. Issue #1 - Issue Identification The main issue is when to record the “safety bonus” of 1 million dollars as revenue. This additional condition will be granted only if PPBJ completes the project without safety problems. The PPBJ management will focus on how to avoid any of those problems in order to get the bonus. Our function, as auditors, is to provide recommendations of how to recognise this “additional revenue” appropriately. The company is privately-owned; therefore, the company can use either PE GAAP or IFRS. Issue Analysis * Referring to IAS 11, 11, the contract revenue is comprised of the initial amount of the contract and variations in contract incentive payment, whenever it is probable to result in revenue and reliably measured. * To recognise the revenue, the performance has to be substantially complete and the collection is reasonably assured. The collection will be assured, because the contract itself is a legal obligation for the purchaser to pay the price negotiated. * PPBJ has a strong record of safety, which can be a reasonable argument...
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...TrueBlood Case 12-5 LabCo is a large construction contracting firm involved in the manufacturing of equipment that is used by other companies to manufacture parts and components for planes, jets and other machines and equipment of the air. Each machine produced by LabCo is tailored made to suit each of its many industry customers. As previously stated LabCo uses a variety of contracts primarily percentage-of-completion based, however, is that the correct approach to take? In addition the firm has recently entered into a fixed price contract with a high level of detail and heavily involved performance specification with Halibut, LabCo intends to use the percentage-of-completion method with this contract. When the contract was accepted and commencement began a great deal of difficulties arose that increased the expenses that LabCo had estimated and pushed back the completion date. With all of the difficulties that LabCo has faced the question should it use another method to account for the contract and if so what method should they use? The purpose of this report is to answer the two previously stated questions which are, under IFRS how should LabCo account for its construction contracts in general and what method should they use in regards to their newest contract with Halibut in the face of numerous complications. Normally special order equipment could include numerous costs that the firm would be unaware of until they arose. In regards to LabCo though, their primary...
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...the other parts of the world in the last few years. -Shrikant Sortur The author is a member of the Institute as well as AICPA, working with Lason Systems Inc, MI, USA. He can be reached at shrikant_ sortur@yahoo.com Revenue Recognition Under US GAAP It is estimated that Revenue Recognition related aspects appear in close to two hundred different pieces of accounting literature; of course these pieces of literature include many nuances, some of which are unique to particular transactions. Since no comprehensive standard on revenue recognition exists, there is a significant gap between the broad conceptual guidance in the Financial International Accounting Standards (IAS) are drafted on a ‘Principles-based’ approach. The same is the case with Indian Accounting Standards, which adopts the IAS framework. The United States Generally Accepted Accounting Principles (US GAAP) are more along the lines of a ‘Rules-based’ framework. The more complex the business, the more specialised the industry, the more difficult the decision becomes for that business as to when to recognise earnings. This article attempts to...
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...combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.” In other words, revenue tracks the inflow of net assets that occurs when a business provides goods or services to its customers. The realization principle requires that two criteria be satisfied before revenue can be recognized: The earnings process is judged complete or virtually complete (the earnings process refers to the activity or activities performed by the company to generate revenue). There is reasonable certainty as to the collectability of the asset to be received (usually cash). INTERNATIONAL FINANCIAL REPORTING STANDARDS Revenue Recognition Concepts. IAS No. 18 governs most revenue recognition under IFRS. IFRS allows revenue to be recognized when the following conditions have been satisfied: 1. The amount of revenue and costs associated with the transaction can be measured reliably, 2. It is probable that the economic benefits associated with the transaction will flow to the seller, 3. (for sales of goods) the seller has transferred to the buyer the risks and rewards of ownership, and doesn’t effectively manage or control the goods, 4. (for sales of services) the stage of completion can be measured reliably. More generally, IFRS has much less industry-specific guidance that does U.S. GAAP, leading to fewer exceptions to applying these revenue recognition conditions. ...
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...Revenue Recognition Revenue from contract with customer EXECUTIVE SUMMARY Revenue Recognition is regarded as one of the most important topic in accounting. However, it is most difficult issues that standard setters and accountants must deal with regularly because the accounting standards and rules are changing all the time for improving the quality of accounting, which also explains why there are so many changes over these two decades on Australian Accounting policy. This report will focus on some accounting policies regarding to recognition of revenue from the contracts with customers, its history before the adoption of international financial reporting standards (IFRS). Also, current standards and the convergence between IFRS and US GAAP in future will be discussed. There are some drawbacks and ambiguity on the earlier accounting standard to recognize revenue, therefore it is understood that the international accounting standard board (IASB) and Financial Accounting Standard Board (FASB) are currently working on the policy relating to the recognizing revenue from the contracts with customers. They have decided that the ultimate goal of the convergence is a single set of high-quality, international accounting standards that both domestic and international companies can use. Once the convergence is bringing U.S. GAAP and IFRS closer together in a few years, Australian entities may be influenced by the new proposals. It would be a challenging task for companies because...
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...FOR A CONSTRUCTION PROJECT HKU Technology Inc. (Hereafter, HKU Tech) is a large construction contracting firm that serves a variety of industrial customers that purchase machinery and equipment from HKU Tech. HKU Tech’s business primarily involves the design and manufacture of large, industrial machinery and tooling that is used by its customers in manufacturing parts and components for fighter jets, transport planes, and other aerospace-related machinery and equipment. All of HKU Tech’s construction contracts involve the design, development, and manufacture of machines that are unique and customized to the specifications of its customers. HKU Tech negotiates all its contracts with its customers on either a fixed-price or cost-plus basis. HKU Tech has developed an accounting policy to recognize revenue related to its customized construction contracts, which is outlined as follows: The Company performs under a variety of contracts, some of which provide for reimbursement of cost plus fees, and others that are fixed-price-type contracts. Revenues and fees on these contracts are primarily recognized on a contract-by-contract basis using the percentage-ofcompletion method of accounting, which is most often based on contract costs incurred to date compared with total estimated costs at completion (cost-to-cost method). The cost recovery method of accounting is used in instances in which reliably dependable estimates of the total costs to be incurred under a specific contract cannot...
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...the stock exchange market in 1995 and a privatisation programme. The transition posed challenges for the Government, private sector institutions and accountants alike. Increasing the role of the private sector required changes to and reforms of accounting systems in order to support better decision-making, attract investments, stimulate economic development, and enhance foreign investors’ confidence in the market. Egyptian accounting and auditing standards (1997–2002) As part of the reform process, the Government of Egypt pursued a policy of harmonising (EAS- Egyptian Accounting Standards) with IAS, while ensuring that specific characteristics of the Egyptian operating environment were taken into account. As a result of Ministerial Decision No. 503, in October 1997 Egypt established the Permanent Committee for Accounting and Auditing Standards to issue EAS that were to be based on IAS, yet modified to suit the local arena. Although official responsibility for setting accounting and auditing standards rests with the permanent committee, the Egyptian Society of Accountants and Auditors practically assumes the main responsibility for drafting accounting and auditing standards. The society’s standard-setting committee selects international accounting and auditing standards that are applicable to the Egyptian framework. Once the...
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...international financial reporting standards CERTIFICATE Learning materiaLs Contents FINANCIAL REPORTING CONTEXT..............................................................3 THE IFRS FRAMEWORK ..............................................................................17 PRESENTATION OF FINANCIAL STATEMENTS ........................................35 ACCOUNTING POLICIES .............................................................................49 REVENUE......................................................................................................61 INVENTORIES...............................................................................................75 PROPERTY, PLANT, AND EQUIPMENT......................................................87 BORROWING COSTS.................................................................................105 GOVERNMENT GRANTS ...........................................................................113 NON-CURRENT ASSETS HELD FOR SALE ..............................................123 INVESTMENT PROPERTY .........................................................................133 INTANGIBLES .............................................................................................145 IMPAIRMENT ..............................................................................................159 PROVISIONS AND CONTINGENCIES .......................................................171 TAXATION...........................................
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...international financial reporting standards CERTIFICATE Learning materiaLs Contents FINANCIAL REPORTING CONTEXT..............................................................3 THE IFRS FRAMEWORK ..............................................................................17 PRESENTATION OF FINANCIAL STATEMENTS ........................................35 ACCOUNTING POLICIES .............................................................................49 REVENUE......................................................................................................61 INVENTORIES...............................................................................................75 PROPERTY, PLANT, AND EQUIPMENT......................................................87 BORROWING COSTS.................................................................................105 GOVERNMENT GRANTS ...........................................................................113 NON-CURRENT ASSETS HELD FOR SALE ..............................................123 INVESTMENT PROPERTY .........................................................................133 INTANGIBLES .............................................................................................145 IMPAIRMENT ..............................................................................................159 PROVISIONS AND CONTINGENCIES .......................................................171 TAXATION...........................................
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...[pic] A Case Analysis on STIRLING HOMEX CORPORATION In partial fulfillment of the course requirements in BA 219 Corporate Financial Reporting WF Class 1830 – 1950, Section WFP Term 1, A.Y. 2014-2015 October 10, 2014 Submitted by: AÑORA, Maria Wilvenna DELLAMAS, Gina LAGUARDIA, Carlo Gerard PANCHO, Mildred REGIDOR, Jonas RICAFORT, Allan Cris Submitted to: Dr. Arthur S. Cayanan EXECUTIVE SUMMARY The Case Analysis concentrated on the accounting practices employed by Stirling Homex Corporation which is a result of the SEC’s clarification of the Company’s revenue recognition methods. Specifically, the analysis focused on the company’s revenue recognition, profit allocation, and capitalization of expense procedures. Overall, the analysis aimed to identify any discrepancies in the Stirling Homex’s financial statements that made the SEC question the accuracy and fairness of the Company’s financial position and performance. A structured methodology was performed by the Group in the analysis of the Financial Statements. In particular, the Group followed the following steps: 1) Analyze the existing accounting procedures employed by the Company, 2) Refer to the International Accounting Standards and Generally Accepted Accounting Procedures any irregularity that would be identified, 3) Pinpoint the effects of these irregularities (if any) on the Company’s published Financial Statements, and 4) Recommend how these irregularities should have been reported. During the course of the...
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...Technical Assistance TAR: IND 39106 Technical Assistance to India for the Uttaranchal Power Sector Capacity Building Project August 2005 CURRENCY EQUIVALENTS (as of 1 August 2005) Currency Unit Re1.00 $1.00 ADB DEA EA EMP HR IA IPDF IT kV kWh MOP MW O&M PIU PMO PTCUL RF RMU RP SGU SHP TA UEID UJVNL UPCL UREDA v – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Rupees (Re/Rs) $0.0231 Rs43.3800 ABBREVIATIONS Asian Development Bank Department of Economic Affairs executing agency environmental monitoring plan human resources implementing agency Indigenous People’s Development Framework information technology kilovolt kilowatt-hour (1,000 watt-hours) Ministry of Power megawatt (1,000,000 watts) operation and maintenance project implementation unit project management office Power Transmission Corporation of Uttaranchal, Ltd. resettlement framework rehabilitation, modernization, and upgrading resettlement plan State Government of Uttaranchal small hydropower plant technical assistance Uttaranchal Energy and Irrigation Department Uttaranchal Jal Vidyut Nigam, Ltd. Uttaranchal Power Corporation, Ltd. Uttaranchal Renewable Energy Development Agency volts TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification Sector Subsectors Themes Subthemes – – – – – General intervention Energy Hydropower generation, transmission and distribution Sustainable economic growth, environmental sustainability Fostering physical infrastructure development, cleaner industrial...
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