Issue 7 - BCRE

Issue 7 - BCRE

This month the Accounting and Auditing Update focusses on the Building, Construction and Real Estate (BCRE) sector and highlights key matters relating to accounting, financial reporting and regulatory areas relevant to this sector.


In this publication, we highlight current Indian GAAP guidance on revenue
recognition by the sector and the guidance under IFRS.  The Institute of
Chartered Accountants of India is expected to issue a guidance note to provide direction on the accounting of the revenue recognition from the sale of real estate under Ind AS. Additionally the publication discusses accounting with respect to two more aspects of revenue recognition in detail: One topic relates to allocation of costs for that second form part of the percentage of completion in a construction contract and second topic relates to principles that should considered while determining when to combine a group of contracts and when to segment a contract. 

The publication also features an interaction with Mr. Govinder Singh, International Business Head and former Chief Financial Officer, Tata Housing Development Company Limited, and explores some key accounting, reporting and other topical matters relevant to the industry.

Ind AS provides specific guidance on the accounting and presentation of an investment property. Our article on this topic highlights the rationale behind classifying an item of property as an inventory, property, plant and equipment, or investment property under Ind AS. Fair valuation of investment properties is another critical performance metric for the BCRE sector, but it has its own set of challenges. Our article also provides an overview on the current practices for fair valuation of investment properties and key challenges encountered in their valuation.

The sector is also affected by a number of financing structures prevalent in real estate companies. Our article provides an overview on the evolution of funding instruments and structures in the real estate organisations. The publication also explores an important concept of Real Estate Investment Trusts (REITs) and provides an overview of the amendments in the Finance Bill, 2016 and potential benefits of establishing a REIT in India.

Additionally, our publication carries a regular synopsis of regulatory updates.


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