Impact of IFRS on Indian Infrastructure and Real Estate Industry
Keywords:
IFRS, PPE, Fair-value, Cost model, Revaluation model, EBITDAAbstract
Indian Infrastructure and Real Estate companies are booking revenues even before they start the construction. This is possible under the currently used percentage of completion method of accounting, which allows companies to book revenues provided an agreement of sale has been signed with the buyer and a specified percentage of the project cost has been incurred. As a result, Indian Infrastructure and Real Estate companies’ revenues are higher by as much as 30% as compared to the work done by them. The adoption of International Financial Reporting Standards (IFRS) will reflect more appropriately the revenues of Indian real estate developers and their ability to deliver projects. We also believe that IFRS deals with market risks that are related to real estate projects more effectively than the percentage completion method.
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