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  • Construction cost

    by prabhatkumar on Saturday, April 22, 2017 at 01:14 PM

    sir,In joint development agreement land was developed by developers and against used of land developers has given flat and shop to land owner free of cost as per JDA. when developer finalize his books of accounts what amount is to be taken in developers books of account 1. construction cost into area which was given to land owner or stamp duty value 2. is this amount is credit to sale consideration in building memorandum account please advise

    Replied byEditorial Board Monday, April 24, 2017 at 04:13 PM

    The accounting treatment shall be based on how the joint development agreement is framed. You need to apply the principle substance over form. It needs to be checked whether the agreement is to acquire the land, construct it and then transfer or the agreement is pertaining to construction on behalf of land owners and then charging consultancy fees. The accounting treatment shall vary accordingly.

    You may get answer to your query by referring the first query given under AS 7 in All About AS (ie. All about AS > AS 7 > ICAI Opinion > Accounting treatment for assets created on behalf of others)


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