Revenue recognition - threshold limit

[hubert fernandes]

we are builders and have adapted percentage completion method of revenue recognition as prescribed in AS7.However revenue on sale agreements is recognised only when we reach a threshold limit of 20% vis a vis the estimated cost.I would appreciate if any case laws are referred wherein such threshold limits are allowed for computation of business profits

[Surender Gupta]

In my view any case law on the subject would be based on case to case basis because this issue is an issue of fact and facts may be different in each case. The recognition of revenue as per your agreement to the extent meets the requirements of AS7 or related standard issued by ICAI itself is a satisfactory situation.

AI Summary

Builder Queries Revenue Recognition Timing under AS7; Guidance Suggests Case-by-Case Analysis Based on Standard Compliance. A builder using the percentage completion method of revenue recognition, as prescribed by AS7, queries about recognizing revenue from sale agreements only after reaching a 20% threshold of the estimated cost. The response suggests that case laws on this issue would vary based on individual circumstances, as it is fact-specific. It advises that if the revenue recognition aligns with AS7 or related standards by the ICAI, it is considered satisfactory.