ACCOUNTING STANDARDS COUNCIL (ASC) ISSUES INT FRS 115 AGREEMENTS FOR THE CONSTRUCTION OF REAL ESTATE

ACCOUNTING STANDARDS COUNCIL (ASC) ISSUES INT FRS 115 AGREEMENTS FOR THE CONSTRUCTION OF REAL ESTATE

    [Singapore, 26 August 2010]

  1. The Accounting Standards Council (ASC) today issued INT FRS 115 - Agreements for the Construction of Real Estate (the "interpretation"), and an entity shall apply the interpretation for annual periods beginning on or after 1 January 2011. The interpretation is modelled after the International Financial Reporting Interpretations Committee Interpretation 15 (i.e. IFRIC 15) which was issued by the International Accounting Standards Board (IASB) on 3 July 2008.

  2. Agreements that are within the scope of this interpretation are agreements for the construction of real estate. The interpretation applies to the accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. Apart from the construction of real estate, such agreements may include the delivery of goods and services. Specifically, the interpretation addresses two issues:

    1. Whether the agreement is within the scope of International Accounting Standard (IAS) 11 Construction Contracts or IAS 18 Revenue; and

    2. When revenue from the construction of real estate should be recognised.

  3. The Council has also issued an Accompanying Note with INT FRS 115, which distils the Council's considerations in reaching its consensus on the accounting treatment for the sale of uncompleted residential properties "off-plan" in Singapore. The accompanying note is an integral part of INT FRS 115 and is to be read together with the interpretation.

  4. Since the issuance of IFRIC 15 in July 2008, the ASC has been evaluating the applicability of IFRIC 15 in Singapore and the potential impact of the interpretation on Singapore businesses. In particular, it had extensive discussions with stakeholders such as the Real Estate Developers Association of Singapore (REDAS), the Institute of Certified Public Accountants of Singapore (ICPAS), the accounting sector and the Urban Redevelopment Agency (URA) to better understand the legal framework as well as the operational norms governing the real estate industry in Singapore.

  5. "The ASC, as the national accounting standards-setting authority, has a responsibility to ensure that the accounting standards prescribed in Singapore are reflective of the economic realities of doing business in Singapore. This is to ensure that the financial statements prepared by local companies help to convey decision-useful information for those who rely on them. The Council will continue to conduct regular reviews of financial standards and, when necessary, make appropriate clarifications to make the standards relevant and appropriate to local business conditions while remaining cognizant of international developments," said Ms Euleen Goh, Chairman of the Accounting Standards Council.

  6. With this issuance of INT FRS 115 by the Council, the Recommended Accounting Practice (RAP) 11 - Pre-Completion Contracts For The Sale Of Development Property issued by the Institute of Certified Public Accountants of Singapore (ICPAS) will cease to have effect for financial years or periods commencing on or after 1 January 2011.