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A real estate company is into construction and sales of low cost houses, where the houses will be advertised for subscription even before the construction work starts. how should revenue be recognized if;
1. the subscriber money is used to build their houses
2. the company obtain a loan from bank to build the houses
3. the company get a housing loan on behalf of subscribersand at what point can we say the houses will be transferred to the buyers?
for real estate, I think IAS 11 more appropriate by recognition based on percentage of completion. there are few methods for measurement and most use by industrial is using on cost to date/total cost to measure the % of completion. the sales should recognize gradually throughout the project terms until acceptance testing done and handover to customer.
for me, it sounds like
1. receive money is deposit irrelevant to sales progress as no cost is incurred
2. obtain loan from bank to funding the project more like finance arrangement
3. company helps customer to obtain loan? the company may incurred some administrative expense for transport allowance to the staff, you may attribute it to the project cost if you can identify for which projects
can I have the Q that you mention above?I am an F3 student so don’t take me seriously, but think you can also use IAS 18 here. This might help you: https://www.accaglobal.com/ca/en/student/acca-qual-student-journey/qual-resource/acca-qualification/f7/technical-articles/revenue-recognition.html
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