Yesterday I was reading an article written by the current president of MASB about revenue recognition for property developer. The crux of the issue was whether current practice of recognizing profit based on % of completion is appropriate. He further elaborates that if % of completion method is not applicable complicates related issues on taxation and borrowing cost of property project. The standard did discuss on whether a developer is in a business of
- selling finished products or
- rendering construction services
Situation 1 means developer only earns it revenue after property is completed and delivered to customer. Situation 2 means developer earns revenue on stages as the construction of property progresses. Hence, the corner stone of this topic is you register a sale only when you have EARN a revenue irrespective of circumstances.
Lets not getting over zealous on technicality of this concept, leave it to all smart accountants to find out.
Coincidently, knowing an accountant who is an expert in applying revenue recognition concept but fail to apply the same concept in gaining respect from others – Respect Recognition vs. Revenue recognition concept.
It relates to a tale of a very senior accountant who is in late 40s trying to introduce concept of respect to an organization she newly joined. This senior accountant is leading a team of approximately 10 accounting staff. Due to working culture differences between this senior accountant and the existing staff has led to an exodus of massive departure of staff. The main crux of issue was senior accountant represents that she does not receive “respect” she deserved from staff for being the most senior accountant in the company.
Now i wish to remind all my readers, respect is like revenue, must be EARNED not BEGGED. I do recognize that you could rarely learn anything from accountant about life, but this one might be a relevant application of accounting concept into our daily life. Please leave me a note if you beg to differ.
