#Accounting Standard

[finprocounsulting]

Analysis of accounting for Joint Development Agreements in the books of Real Estate Developer under Ind AS 115 – Revenue from contracts with customers

A. Background:

In recent times, due to increased prices of land, very commonly, real estate developer / contractors may not own lands in their own names. Landowners, on the other hand, may not possess the skillset to develop the land. And thus, both parties enter into a Joint Development Agreement (“JDA”) with the landowner for the development of the land and for the construction of commercial, retail, and residential properties on the land owned by the landowner. Pursuant to a JDA, the developer and the landowner enters into an agreement whereby landowner transfers the land to the developer for development in the form of ‘land development rights’ in return of a consideration in the form of specific constructed portion out of total constructed area on the entire land.

To elaborate further, in accordance with the JDA, the developer and landowner agrees that the landowner shall be entitled to a certain percentage of saleable / leasable area of the total constructed area which may include both residential and commercial property constructed by the developer. The developer is entitled to the balance constructed area in the project developed after allocating the portion to the landowner. Percentage of sharing may change on a case-to-case basis. The developer receives land development rights and in return as a consideration for the land development rights is required to provide constructed area to the landowner free of cost. The developer will incur the cost of development or of construction, allocate the pre-decided portion to the landowner and the remaining portion will sell or lease to the outside customers for cash consideration or otherwise.

B. Accounting issue:

In the above case, the developer entity has received the land in the form of land development rights from the landowner for construction of residential or commercial units. The landowner has granted exclusive right to develop the Project to the developer entity. As a consideration for the rights, the developer entity is required to allocate the pre-decided constructed area to the landowner. The remaining constructed inventory after allocation to the landowner, will be sold to the outside customers. With respect to this barter transaction between the developer and the landowner, following accounting issues arise:

Issue 1 – How to account for and present the ‘land development rights’, received by the developer from the landowner, which is a consideration in non-cash form by the landowner for the obtaining the constructed property from the developer entity, in the books of the developer entity?

Issue 2 – Developer entity sales constructed area and receives consideration from the landowner in the form of ‘land development rights’ and from the outside customer in the form of cash or otherwise. How to recognise revenue as per Ind AS 115 – Revenue from Contracts with Customers (henceforth referred to as “Ind AS 115”) in the books of the developer entity in both the above cases?

C. Relevant guidance under Indian Accounting Standards (Ind AS):

Core principle of Ind AS 115

The core principle of Ind AS 115 is that revenue should be recognised when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. To achieve the core principle, the new standard establishes a five-step model that entities would need to apply to determine when to recognise revenue, and at what amount.

Five-step model 

Non-cash consideration

Para 66 To determine the transaction price for contracts in which a customer promises consideration in a form other than cash, an entity shall measure the non-cash consideration (or promise of non-cash consideration) at fair value.

Para 67 If an entity cannot reasonably estimate the fair value of the non-cash consideration, the entity shall measure the consideration indirectly by reference to the stand-alone selling price of the goods or services promised to the customer (or class of customer) in exchange for the consideration.

Para 69 If a customer contributes goods or services (for example, materials, equipment or labour) to facilitate an entity’s fulfilment of the contract, the entity shall assess whether it obtains control of those contributed goods or services. If so, the entity shall account for the contributed goods or services as non-cash consideration received from the customer.

Satisfaction of performance obligations

Para 31 An entity shall recognise revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service (i.e., an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.

Para 32 For each performance obligation identified in accordance with paragraphs 22–30, an entity shall determine at contract inception whether it satisfies the performance obligation over time (in accordance with paragraphs 35–37) or satisfies the performance obligation at a point in time (in accordance with paragraph 38). If an entity does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time.

Para 33 Goods and services are assets, even if only momentarily, when they are received and used (as in the case of many services). Control of an asset refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Control includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset.

Performance obligations satisfied over time.

Para 35 An entity transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:

(a) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs (see paragraphs B3–B4);

(b) the entity’s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced (see paragraph B5); or

(c) the entity’s performance does not create an asset with an alternative use to the entity (see paragraph 36) and the entity has an enforceable right to payment for performance completed to date (see paragraph 37).

Para 36 An asset created by an entity’s performance does not have an alternative use to an entity if the entity is either restricted contractually from readily directing the asset for another use during the creation or enhancement of that asset or limited practically from readily directing the asset in its completed state for another use. The assessment of whether an asset has an alternative use to the entity is made at contract inception. After contract inception, an entity shall not update the assessment of the alternative use of an asset unless the parties to the contract approve a contract modification that substantively changes the performance obligation. Paragraphs B6–B8 provide guidance for assessing whether an asset has an alternative use to an entity.

Methods of measuring progress in case of over the period recognition

Para 39 For each performance obligation satisfied over time in accordance with paragraphs 35–37, an entity shall recognise revenue over time by measuring the progress towards complete satisfaction of that performance obligation. The objective when measuring progress is to depict an entity’s performance in transferring control of goods or services promised to a customer (i.e. the satisfaction of an entity’s performance obligation).

Para 40 An entity shall apply a single method of measuring progress for each performance obligation satisfied over time and the entity shall apply that method consistently to similar performance obligations and in similar circumstances. At the end of each reporting period, an entity shall remeasure its progress towards complete satisfaction of a performance obligation satisfied over time.

Para 41 Appropriate methods of measuring progress include output methods and input methods. Paragraphs B14–B19 provide guidance for using output methods and input methods to measure an entity’s progress towards complete satisfaction of a performance obligation. In determining the appropriate method for measuring progress, an entity shall consider the nature of the good or service that the entity promised to transfer to the customer.

D. Analysis and conclusion:

Issue 1 – Based on the facts of the case above, Developer is the entity who is into the business of construction. Developer obtains land in the form of land development rights from the Landowner and in exchange provides pre-decided constructed area on the same land as a consideration for the land development rights. This is a barter transaction where developer sales the constructed area and receives land development rights instead of cash in consideration for sale to the landowner. The remaining portion can be sold to the outside customer for cash or otherwise. This sale of the constructed area by the developer entity is required to be accounted for under Ind AS 115.

Based on the guidance provided under Para67 and Para 69 of Ind AS 115, developer entity shall recognise the land development rights obtained from the Landowner as ‘inventory’ or ‘work-in-progress’ once the land development rights are obtained. ‘Land development rights’ shall be measured initially at its fair value in the books of the developer. If the fair value of the land development rights is not reliably determinable, then such land shall be measured indirectly with reference to the fair value of the constructed area allocated to the Landowner.

Issue 2 – Based on the guidance provided under Para 66, transaction price for the revenue from landowner customer shall be equivalent to the fair value of the land development rights obtained by the developer entity. If the fair value of the land development rights is not determinable, then the value of such land development rights shall be measured indirectly with reference to the fair value of the constructed area allocated to the Landowner customer. Once transaction price is determined based on either of the above methods, it shall be recognised either over the period or at point in time as revenue in the books of the developer as per the guidance provided in Para 31 to Para 35.

The developer entity has two different types of customers:

1. First is the landowner customer, to whom entity will sell the construction services in exchange of the land development rights as consideration and

2. Second is the outside customer to whom developer will sell the constructed area for cash consideration or otherwise.

In both the cases, developer entity will apply guidance from para 31 to 35 in order to recognise the revenue either over the period of time or at point in time depending on how the control in performance obligation is getting transferred.

As per the contractual terms of the JDA, landowner controls the portion getting constructed for his allocation and thus, control in the performance obligation from developer is transferred to the extent developer provides construction services to the landowner customer. Based on the guidance under para 35 (b), revenue in this case can be measured over the period. As per guidance provided in para 39 to 41, such revenue is to be measured using either input or output method of percentage of completion. Management shall decide which method best depicts the transfer of performance obligation and shall follow the method consistently over the years.

In case of revenue from outside customers, sale of constructed units is comparable to the sale of goods and case does not fit in any of the three scenarios mentioned in para 35. Neither constructed units can be utilised as they are constructed, nor control gets transferred to the outside customer as it gets constructed. Further, developer entity is not constructing any specialised asset which cannot be transferred to any third party if customer fails to obtain delivery of the constructed units. Hence, revenue from sale of constructed units to the outside customer will be recognised at point in time when possession of the units will be handed over to the customer.

E. Industry practicesCompany Name: Brigade Enterprises Limited

Excerpts from Annual Report FY 2021-22 – Significant Accounting Policies

Land

Advances paid by the Company to the seller/ intermediary toward outright purchase of land is recognized as land advance under loans and advances during the course of obtaining clear and marketable title, free from all encumbrances and transfer of legal title to the Company, whereupon it is transferred to land stock under inventories/capital work in progress.

Land/ development rights received under joint development arrangements (‘JDA’) are measured at the fair value of the estimated construction service rendered to the landowner and the same is accounted on launch of the project. The amount of non-refundable deposit paid by the Company under JDA is recognized as land advance under other assets and on the launch of the project, the non-refundable amount is transferred as land cost to work-in-progress/ capital work in progress. Further, the amount of refundable deposit paid by the Company under JDA is recognized as deposits under loans.

Revenue recognition

Revenue from real estate development of residential or commercial unit is recognised at the point in time when the control of the asset is transferred to the customer.

Revenue consists of the sale of undivided share of land and constructed area to the customer, which have been identified by the Company as a single performance obligation, as they are highly interrelated/ interdependent. The performance obligation in relation to real estate development is satisfied upon completion of project work and transfer of control of the asset to the customer.

Further, for projects executed through joint development arrangements not being jointly controlled operations, wherein the land owner/possessor provides land and the Company undertakes to develop properties on such land and in lieu of land owner providing land, the Company has agreed to transfer certain percentage of constructed area or certain percentage of the revenue proceeds, the revenue from the development and transfer of constructed area/revenue sharing arrangement in exchange of such development rights/ land is being accounted on gross basis on launch of the project. Revenue is recognised over time using the input method, on the basis of the inputs to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation.

For contracts involving sale of real estate unit, the Company receives the consideration in accordance with the terms of the contract in proportion of the percentage of completion of such real estate project and represents payments made by customers to secure performance obligation of the Company under the contract enforceable by customers. Such consideration is received and utilised for specific real estate projects in accordance with the requirements of the Real Estate (Regulation and Development) Act, 2016. Consequently, the Company has concluded that such contracts with customers do not involve any financing element since the same arises for reasons explained above, which is other than for provision of finance to/from the customer.

Excerpts from Annual Report FY 2021-22 – Significant Accounting Estimates

Accounting for revenue and land cost for projects executed through joint development arrangements (‘JDA’)

For projects executed through joint development arrangements, the Company has evaluated that landowners are not engaged in the same line of business as the Company and hence has concluded that such arrangements are contracts with customers. The revenue from the development and transfer of constructed area/revenue sharing arrangement and the corresponding land/ development rights received under JDA is measured at the fair value of the estimated construction service rendered to the landowner and the same is accounted on launch of the project. The fair value is estimated with reference to the terms of the JDA (whether revenue share or area share) and the related cost that is allocated to discharge the obligation of the Company under the JDA. The fair value of the construction is considered to be the representative fair value of the revenue transaction and land so obtained. Such assessment is carried out at the launch of the real estate project and is not reassessed at each reporting period. The management is of the view that the fair value method and estimates are reflective of the current market condition.

Similar accounting treatment has been followed by Provident Housing Limited and Prestige Estates Projects Limited. The annual reports of these companies for FY 2021-22 can be downloaded from the following link:

Provident Housing Limited https://www.providenthousing.com/investors

[genericpuff]

bold of me to be stunned at this point that one of the most blatant errors from the original comic made it into the fucking printed book that people paid $20+ for

[pseudophan]

music to my ears listening to my mum and granddad talking about politics in the living room and hearing "nora said-" at least three times. yessss listen to me i'm very smart

[foldingfittedsheets]

First the Daisy story, now the glitter rag… bro I’m so sorry that you keep getting harassed by people who lack reading comprehension and/or critical thinking skills, I wholeheartedly blame generative AI for that

(But fr tho, you definitely didn’t do anything wrong. Thank you for sharing your stories with us in spite of the jerks tripping out of the woodwork <3)

Oh my god this started with “first the Daisy story” and I broke into a sweat and then you were very nice and reassuring, whew. Thank you.

I gave the glitter anon some grace and then blocked. I have better things to do with my life than comfort people who are deliberately taking offense about misunderstanding a dumb internet story.

[irish-hobbit]

he's observing

[sistersorrow]

Is the average monsterfucker emotionally ready to consider the possibility that from the perspective of the monster they're dating they are the monsterfucker, and not the human?

[fisheito]

This was my introduction to bunny waiter eiden,which warrants a cut because I'm me🫢😑😐

I wuz screaMun because ppl weRE FAST ON THAT SHITE the dash was lighting up with eiden intimacy room details and i was Aghast LIKE NO!!! I CANNOT LOOK UPON YE .

I must RUN INTO TH3 QI LALAPP .APP. POSTHASTE

Oh got THERE HE IS . DIVERGENT DREAM? PLEASE ohhh look he's doing magic tricks just like he was just showing off to kuya in sleepless fun fair awww the continuity!!!-----

SHUT UPPPP I AGREE WITH YOU 😭😭😭😭😭😭😭😭😭😭😭😭😭😭😭🥺😭

So I FINISH READING the chapters that are released and i get to the Battle stages and OhMo what's this i see

Multiplier?+?+?+++!!!

Ohhhkaaaaayy that means i have to roll for eidento get my max rewards NoOooo;;; he's always eluded me I'm gonna lose all my comtracts qnd BE EMOTIONALLY CRUSHED 3 YEARS IN A ROW (ノД｀)ノ eiden PleaSe come to me i want your furniture my floors are barren i am in desperate need of chairs for my tables and your little nightstand of beverages PLEQSE. I HAVE SO MUCH OF YOUR FAVOURITE FOOD. PLEASE.

PSPSSPSPPSPSSPSPSPPSSPS

GasP NO...ITCANTBE!!!!

>?! In THE FIRST 20 PULLS. wsit who are u protecting what is the story behind your line--

MY NEW FURNITURE!!!!!!!!!!!!!!!!!!!!!!! THANK YOU BEAUTIFUL BLESSED GENEROUS EIDEN MWAH I ML OVOE U

now. what are you. Are you going to help me in battle what's your deal

Light guardian!!! That's cool!! Don't have a light guardian in my battle roster!!

Wtf is going on!!!!! This doesnt look like a set of pure guardian skills!@!!! WHATEVER! IT'S FINE! IT'S EVEN BETTER, ACTUALLY BECAUSE I DOUBT ANY REGULAR GUARDIAN CAN OUTCLASS SR MORVAY ANYWAY

Hmmm...... does that mean i won't really need this eiden for most battles? Morv has been carrying me and idk if it's worth it to build eiden to 3 stars because i only have 1 of him... that would cost a LOT of memory shards... :/

BUT EVERY EIDEN HAS BEEN SOOOO USEFUL UPON RELEASE. I CANNOT MISS OUT ON HIM THIS TIME!!!

CRYSTALS FOR YOU, .YMY LIEGE 🫴🫴🫴🫴🫴🫴 . Did i just drop the 5400 memory crystals I've been saving for years oh whatever i still have SOMe left

WAughH i NEED TO LEVEL HIM NOW I DON'T KNOW WHEN I'LL NEED HIM IN BATTLE BUT I NEED TO BUILD HIM *NOW*

MUST REACH MINIMUM TIER 6 SPECIAL ABILITY!!!!! I CAN (PROBABLY) AFFORD THAT MUCH I CAN BUILD HIM MORE WHEN I ACTUALLY USE HIM IN BATTLEA AA A A A AAAAAAAAAA WHER E IS MY GOLD I NEED COIN

AND NOW FOR THOSE INTIMQCYROOM BUFFS

Aaahhhh..... eiden is now the default face once i enter the Intimacy Rooms..... yes, this feels proper. Arrival of the king. Positioned Where he rightfully belongs.

Oh Glorb I FORGOT THAT GIFTING EIDEN PORTRAITS DOESNY USE ANY POINTS LET'S GOOOWWEEEEEEEEEEE

FOR THE LOVE OF ALL THAT IS SALTED AND SEASONED I nEED TO HEAR HIS 18 SECOND ORGASM NOISE (<- so the legends say.idk. i never counted. I should count now. what The FriauK wAS TGAT SQUEAK)

How did it only take ~200 portrsits to unlock all 5 rooms what have i been hoarding for why didn't the other eidens come to me SIR I'M KEEPING YOUR FAVE SNACKS IN MY PANTRY FOREVER SO YOU'LL BE ENTICED TO VISIT. EIDEN YOU'RE KILLING ME IM RUNNING OUT OF ROOM FOR MY OWN SNACKS BECAUSE YOURS ARE TAKING UP ALL THE SPACE--!!

5-room-buffed now. BReathes. ok. Fine, we're good. We're o k ay. I cant watch the rooms yet, though. Not until the full event is released. I need to know everything before i dive in. AAAAAHHHH HHHHHHHHHHHHH I FINALLY HAVE AN EIDEN AT TIME OF RELEASE!!!!! A CURRENT EIDEN!!! HE IS WITH ME AND I'M NOT BANKRUPT! WWAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

..nd this is me after that whirlwind of emotion, which all happened in <10 minutes

Eiden put me in some sort of trance

Whe4rn am i.?

Why are my coffers empty

[alwaysbewoke]

the fix is in!!

[darkpoeticsoul]

This is what emotional maturity should look like. A real man doesn't just say he loves you—he shows it through how he treats you. He takes accountability. He thinks before he acts. He protects your peace, not becomes the reason you lose it.

He understands that love isn’t just about passion or presence—it’s about responsibility. He doesn’t play with your heart and then say “I didn’t mean to.” He means to keep you safe, cherished, respected.

Being “real” is more than masculinity. It’s emotional discipline. It’s knowing that your partner’s heart is not a punching bag for your own unhealed wounds. Safe men are sexy af ;)

[chebyshevptera]

“be nice, there is a person behind that screen” there is a person behind every screen . i will not allow someone to harass me and then treat them kindly or educate them on how to be a decent human being. god bless

[munchboxart]

New background OC for my Salmon guys + Mui drinking

[dennydreadful]

Idyllic Island: Playhouse

Chapter 1 Part 1

been feeling REALLY art blocked lately, and as much as i hate to admit it, the state of things has really been getting to me. i decided i'd rather be productive than stressed out and doomscrolling all the time, but because of the stress it's been hard to find the drive to draw. i know i have another comic i could be working on with d explosion, but the pressure to be funny feels stifling right now. so! i've decided to return to something familiar, and not hold myself to a super high standard for it.

i'm not entirely sure where i'm going with this, but it has been satisfying to make so far.

[horsemeatluvr23]

the juppet !! i just realised he is jerma posing i swear that was unintentional...... i spent so long digging thru muppet concept art and looking at old puppet designs just to end up doing a rly simple drawing but. i love joehills!! i have only been watching them for like 4 years but their videos r so special to me :3

[hejihra]

print by @tbgkaru-woh

other goodies also by @tbgkaru-woh

[lilac-set]

Ya ever think about how when you dont receive medical treatment for something you have to sign an “against medical advice” form saying that you understand if you dont follow medical advice you could experience increased and unforeseen problems including death, but if you do receive medical treatment for anything you also have to sign an informed consent form saying that you understand if you do follow medical advice you could experience increased and unforeseen problems including death

[sunnydreadfu11]

Cancel culture may not be “real” or lasting or whatever, but people DO need to be held accountable for the shitty things they’ve done or said. If you dig into anyone’s past you’re bound to find something you don’t like. It’s part of the human experience to learn and grow from past mistakes, to recognize when you’ve had a bad take that was based in ignorance or hatred. And although I myself have been struggling with forgiving people for things, I can at least appreciate when an artist calls themselves out or makes some type of apology in regards to the not great things they’ve done.

So please stop trying to “point out” things from Kendrick Lamar’s past as an example of why he should be canceled while completely ignoring the fact that his entire discography has been about his journey of healing and growth. I don’t care if you don’t listen to rap. If you bothered to go through his music you’d know that he’s mentioned time and time again that he’s not a perfect person, that he’s done bad things and that he’s put in the work to fix it. This man has rapped about being in therapy. He’s rapped about wanting to be a better role model for his children and community. He grappled with the guilt he felt for making music that contributed to stereotypes or lined the pockets of people who didn’t have his best interest in mind. He rapped about the pain he watched his mother go through, the pain he caused his wife by not being a better spouse. He rapped about the horrors he endured as a child and a teen and how much he’s grown from the dark place he was in bc of it.

If you want to get into his music and you don’t know where to start, just start at the beginning. Kendrick tells a story through his music. It’s a story of evolution and redemption that feels very, very genuine. And LISTEN to the lyrics. Actually try to understand what he’s saying bc even when you think it’s obvious what he’s talking about, I promise you it’s not. He won a Pulitzer for a reason. Another thing you have to understand is that he makes a lot of references to Black American culture, which is very widely copied, but rarely understood or acknowledged. And most of these references are made as a sort of protest.

I’m not here to make anyone feel bad about not knowing Black culture in America and how it differs from other American cultures, but it’s worth understanding, especially if you listen to rap, hip-hop, pop, country, jazz, rock, blues, etc. These are all genres that are rooted in Black American culture and most of them were made to protest oppressive systems. If you love Nirvana then you should understand where Kurt’s influence came from and how he was heavily against racism. If you like country music then you should know where it comes from. If you can listen to BTS and read all the translations of their songs, then you can at least try to understand rap lyrics on a deeper level.

There’s no shame in educating yourself.