SINGAPORE: Listed property developers may experience some volatility in the trading of their shares, if a proposed change to real estate financial reporting standard is implemented.
The International Accounting Standards Board has been consulting the industry on whether developers should book profits when they sell a new property in advance or when the project is completed.
A similar consultation by the local Council on Corporate Disclosure and Governance was done last month.
Property developers in Singapore sell condominiums as they build them.
They receive progressive payments from buyers and report their revenue and profits each quarter.
But if the new real estate financial reporting standard is implemented, developers can only book their profits and revenue at the end of each project rather than progressively.
Assuming it takes 18 months to build a new property from scratch, the developer will record zero profit for this project in the first year and have a spike in revenue and profit at the end of the second quarter in the second year.
Accountants say the change was proposed because the accounting bodies believe properties should be viewed as goods and not services.
If the ownership of the goods has not been transferred to the buyer, the developer or seller cannot, theoretically, claim he has sold it.
So, even if he has received partial payment, he should not record it in his books as revenue and profit.
Channel NewsAsia understands that developers have submitted their feedback to the Council on Corporate Disclosure and Governance through the Real Estate Developers Association of Singapore (REDAS).
REDAS declined to comment on the issue.
<-------- if the developer or contractor can only book profit/loss by the end of the project, what about other trades? All contracts secured supposed to be in book value.. aren't they?
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