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ACC FOR PROPERTY DEVELOPMENT - Coggle Diagram
ACC FOR PROPERTY DEVELOPMENT
PD activities
involving necessary steps to plan & construct the land into vacant lots, residential, commercial & industrial buildings.
Many agencies/gov are involved bcs of dealt with the land
Types of Vacant Land
Malay reserves
Leasehold
Freehold
Status of land
(categorized by its intended use)
Agriculture (Paddy field, Orchard/Rubber tree)
Commercial
Residential building
Industrial building
Definition:
PD refers to the biz of acquiring land - for the purposes of constructing thereon - and selling completed residential/ commercial/ industrial buildings - whether as a whole or by parcels- as well as vacant lots (developed for the construction of such buildings)
Development unit:
a unit of residential/ commercial/ industrial buildings & vacant lot developed for sale
Housing Development:
A development/ construction of more than 4 units of housing accommodation
Real Properties Asset:
refer to land that are not classified as current asset
Relative sales value:
the ratio of the estimated current selling price of each individual development unit at the time evaluation is being carried out
NATURE OF INDUSTRY
Development activities carried out over
more than 1 acc period
(>1y)
Revenue
may received at varying points in time & quantity
Sales
can be occurred at the point of launching the project / at any stage of the construction work / even after the construction completed
The
cost
of development activity incurred need to be determined ( esp. related w common infra. costs)
EFFECTIVE STANDARDS & REG
FRS 201 Property Development
Housing Developers Act 1966
GOV Dept
related w housing dev. industry
Ministry of Housing & Local Gov
Local Gov Dept
National Housing Dept
Fire Services Dept
Dept of Town & Country Planning, Peninsular Malaysia
Sewerage Services Dept
MAIN FINANCIAL ACC ISSUES
Measures Cost incurred
PD COST:
All costs tht are directly attributable to dev. activities / that can be allocated on a reasonable basis to such activities
Para 16, FRS201
PD Costs can be divided into:
A.
Costs associated w land acq
B.
Costs related directly to a specific property dev. activity
C.
Costs attributable to the dev. activities in general
[shall be capitalized & reported as current asset]
A. COST ASSOCIATED W LAND ACQ
Purchase price of land
Professional fees
Stamp duties
Commission
Conversion
Other relevance levies
[shall be capitalized]
Any pre-acq costs will be charged to SP&L as incurred
cost before acq the land
cost to search suitable land
feasibility cost
B. COST DIRECTLY RELATED
Cost of designing & constructing the specific project
Professional fee (Architect, consultant)
Infrastructure work (Road, facilities)
Construction cost
(1. Contract price w contractor; 2. DM; 3. DL at site; 4. Depr of equipment used in the project)
C. COSTS ATTRIBUTABLE
costs tht would be allocated to existing & future PD project w the
same geophysical location
(ex. mandatory land reserve; infrastructure cost)
costs tht would be
allocated to ALL project
currently in progress in various location (ex. corporate expenditure)
Borrowing costs (if fulfill qualifying asset definition - MFRS123)
Contingency costs (related w defect liability = the repair cost involved in the warranty period)
ALLOCATION METHOD:
Specific Identification (ex. direct building cost)
Relative sales value (where specific id is not possible)
Other appropriate methods consistently applied (ex. size of land, average cost)
Recog. of Expenses & Revenues (P&L)
PD Revenues:
Selling price (based on S&P agreement
Add. revenue ( Add. design / specification)
Recognition of revenue: (based on unit sold- met ALL the critera)
Upon signing S&P
Upon commencement of dev & construction activities
Financial outcome can be reliably estimated
(3) Financial outcome can be reliably estimated
, when met ALL these criteria:
Total revenue can be measured reliably
Probably economic benefit will flow to entity
Both costs & stages of completion can be measure reliably
Cost attributable can be clearly identified
If those criteria not met, the revenue should be recognised based on the extent of PD cost incurred
FRS201 only allow the
Percentage of Completion (POC)
method in determine & recog. of revenue for PD -by reference to the stage of completion of the building units (have been sold)
Under this method, revenue will be recognised progressively (over time) & NOT AT LUMP SUM (at point of time)
Determination of POCM
(method):
The proportion of cost incurred for work perform to date (limited to the cost that reflect work performed)
Surveys on work performed (shall not be based on the progress billing & payment received)
Completion of a physical proportion
Progress Billing (PB):
refers to when the PD company issue bill to buyers of its development unit progressively ( based on the stage of completion)
Recog. of PB:
If the revenue recog. in the income statement < the amount billed to customers ( recog. this excess as a PB (current liability))
If the revenue recog. in the income statement > the amount billed to customer ( excess= accrued billing (current asset))
LAND HELD FOR PD
Recognition: Refers to the
land bought but there is no dev. activities have been carried out @
when dev. activities are not expected to be completed within the normal operating cycle
the land classified as
NCA
& reported at
cost less any acc. impairment losses
VALUATION OF INVENTORY
Inventory represent a LARGE % of the business assets for PD industry
In the form of:
Land held for future residential
Land in the course of development & for sale
Building under construction & for sale (PD Cost)
Unsold completed dev. unit (reported at Lower CNRV)
Presentation & Disclosure
Acc policies:
Method used to determine the stage of completion for PD activities
Revenue & related expenses recog in P&L
Detailed abt PD cost carried as an assets (Gross amount of PD Cost; PD cost incurred during period (3 cost); PD cost recog as an expense (upon sale of unit); Disposal/Transfer to other category)
PB
Accrued billing (Rev>PB) - as current asset
Progress Billing (Rev<PB) - as current liabilities
Land Held for DP
Gross carrying amount of the cost acc. at the beginning & ending
Recon. of carrying amount at the beg. & end.