Real estate companies and companies involved in carbon trading will have to change the way they recognise revenues. It's all thanks to a new guidance note issued by the Institute of Chartered Accountants In India (ICAI), reports CNBC-TV18's Payaswini Upadhyay.
In a move to reduce the disparate practices of revenue recognition by real estate companies, ICAI has issued a guidance note identifying threshold limits when revenues from projects can be recognised.
These thresholds are:
- When all critical regulatory approvals are secured
- When 25% of the project is completed
- When 25% of the project's inventory is sold
- When at least 10% of the expected revenue is received
This is in sharp contrast to the current practise, where revenue recognition differs from company to company... And experts say this will mean a change in valuations and quarterly profit statements.
Dolphy D'Souza, Partner, E&Y says,
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