The increase in complexity of the terms of real estate transactions has resulted in diversity in practice around revenue recognition by companies in this sector.
Accordingly, on 11 February 2012, the ICAI issued a revised GuidanceNote on Accounting for Real Estate Transactions (revised GN). The revised GN supersedes the existing GN and seeks to achieve uniformity in the accounting and reporting practices in this area. The revised GN is likely to have a significant impact on the reported revenues and profits of companies in the real estate sector.
The revised GN applies to revenue recognition involving sale of real estate in relation to all projects, which will commence on or after 1 April 2012. The revised GN will also apply to projects, which have already commenced but where revenue is being recognized for the first time on or after 1 April 2012.
This KPMG Alert summarizes the key requirements of the revised GN and also highlights some of the key implementation challenges.