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IFRIC clarifies practice on agreements for the construction of real estate
14 July 2008
The International Financial Reporting Interpretations Committee (IFRIC) has moved to clarify practice involving agreements for the construction of real estate.
It has issued an interpretation designed to standardise accounting across jurisdictions for the recognition of revenue among real estate developers for sales of units, such as apartments or houses, off plan, before construction is complete.
The International Accounting Standards Board (IASB) said 'IFRIC 15' provides guidance on how to decide whether an agreement for the construction of property is within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from the construction should be recognised.
IFRIC chairman Robert Garnett said: "IFRIC 15 clarifies how the existing principles in IAS 11 and IAS 18 apply for the revenue recognition in the real estate sector and by doing so will ensure consistent accounting."
He added some firms will have to change their accounting as a result of the interpretation.
The IASB was formed in 2001 and assumed accounting standard-setting responsibilities from its predecessor body, the International Accounting Standards Committee.
Its main aim is to provide the world's integrating capital markets with a common language for financial reporting.
