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CONTINUATION PROPERTY DEVELOPMENT ACTIVITIES (PDA). Work In Progress. Additional Notes. In many aspects FRS 201 similar to FRS 111 (e.g. wrt identifying stages of completion - % of completion method, cost incurred to date over total estimated cost) Total estimated cost =

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Continuation property development activities pda


Additional notes

Work In Progress

Additional Notes

  • In many aspects FRS 201 similar to FRS 111 (e.g. wrt identifying stages of completion - % of completion method, cost incurred to date over total estimated cost)

  • Total estimated cost =

    Cost to date + Future costs

    May change throughout the dev activities up to completion of project

Property development what are they
Property Development What are they?



(i) Developing land to construct and ultimately sell completed housing, commercial or industrial buildings whether as a whole or in parcels

(ii) Developing land and subsequently sell vacant land for construction of buildings or as farms or orchards


(1) Primary feature of PDA:

(a) Nature : Dev activities carried out > 1 actg period

(b) Before construction work can be started, Require approval of relevant authorities wrt conversion of land to residential/commercial use, sub-div of land, environmental impact assessment and etc

(2) Sale – May take place at varying points of time

E.g: When project is launced, when construction work starts, on completion of project, period after work completed





(3) Incentives from developer

E.g: Discounts, furnitures

(4) Land held for Property Development

Comprises of :

(i) Land WITH NO development activities been carried out yet

up to

(ii) LAND WITH development in advanced stages



(5) Property Development Costs

Costs directly incurred or those allocated on reasonable basis,

classified into 3 main categories:

(i) Cost assoc. acquisition of land – Purchase price, stamp duties, conversion of land cost (e.g. from agriculture to residential

/commercial use) and others

(ii) Cost directly assoc specific develop. activities –

Professional fees (lawyer, architect, valuer, engineer, financial

consultation) contractor’s costs and borrowing costs

(iii) General costs – Infrastructure (connecting road, bridge) and community centre – that attributed to the dev activities and can be allocated to the projects (These costs allocated based on relative sales value of the projects that benefited from such costs because need to be constructed for whole dev area rather than spec. proj)

Example 1
Example 1

XYZ acquired 20 hectares of land costing RM25Mil to develop 2 housing projects: Delima

1 and Delima 2. Project 1 involves the construction of 200 terrace houses on 8 hectares

of land and Project B involves the construction of 100 detached houses on 10 hectares

of land. The remaining 2 hectares are to be developed into recreational park for the

residents. The sales price of a terrace house is RM250,000 and of a detached house,

RM 1 Mil. Infrastructure and recreational park cost is estimated to cost RM2.75 Mil.


Identify the total common costs and the amount of these costs allocated to Project 1

and 2


Common Costs: (Read Para 21 & 24)

Price of 2 hectares of land = (RM 25Mil/20) x 2 = RM2.5M

Estimated Infrastructure and Recreational park cost = RM2.75M

Total Common Costs = 2.5 + 2.75 = RM5.25M


(Refer Para 5)


Project 1 Project 2

Relative Sales Value 250K x 200units 1000K x 100units

=RM50,000K = RM100,000K

Allocation of common cost:

(50/150) x 5.25M (100/150) x 5.25M

= RM1.75M = RM3.5M

Allocation based on relative sales value

Recognition revenue and expense para 25 39


Recognition :Revenue and Expense(Para 25-39)_

Revenue: Selling Price as per S&P agree. + Add rev due to

variation in dev work

-Variation: Instruction by customer to change scope of work to be performed as per S&P. E.g: Change specf

of design, duration of dev project contract. Additional

revenue arise included as prop. dev rev (Para 26)

- Amt of rev recognised for the actg period based on

stage of work completed as at bal. sheet date

Expenses: Expense cost incurred to date that reflect work

performed – based on stage of work completed

Revenue recognised Costs expensed

% work completed as at bal. sheet date

Continue example 2
Continue….Example 2

In year 20X6, FaVBuilder, a housing developer launced a project offering 500 houses for

sale. The sale price of each unit was RM500K, requiring the buyer to pay 10% of sales

price on signing S&P agree. At end of year 20X6, 100 houses were sold. The stage of

completion was determined to be 20%. By end of year 20X7 another 150 houses were

sold giving a total of 250 houses being sold

As at y/e 20X6:

Revenue to be recognised is based on units sold = 100 x RM500K= RM50,000K

As at y/e 20X7:

Total Rev recognised is = 250 x RM500K = RM125,000K

Less: Amount of revenue recognised in year 20X6 = RM50,000K

Revenue recognised in year 20X7 = RM125Mil – RM50Mil = RM75Mil


Stage of completion Method = Percentage of completion Method

See Para 34, 35, 36

(i) Proportion of Prop Dev Costs incurred to date over estimated total property dev costs (Read further Para 40)

Estimated total property dev costs = Cost to date + Future costs

(ii) Surveys of work performed

(iii) Completion of physical proportion of property development work (e.g. unit of buildings completed)

Example 3
Example 3

Happy Developer incurred RM100Mil in acquiring 500 hectares of land. The

stamp duties, conversion costs and other related costs amounted RM 25Mil.

The land is designated for the following purposes:

Phase A 200 hectares to build 1000 link houses – selling price RM 200K/ unit

Phase B 250 hectares to build 600 luxury homes – selling price RM 1 Mil/unit

Common costs 50 hectares for infrastructures and other common amenities

In year X1 the co launched its linked house project and sold 600 houses at

RM200K/unit. Infrastructure costs estimated at RM40Mil and RM28Mil was

incurred in year X1. At y/e X1 Prop Dev costs incurred was RM48Mil. Estimated

develop costs to complete were determined to be RM72Mil. In year X2 another

300 units were sold. Costs to date were RM150Mil which comprise land,

development costs and common cost. The development cost to complete was

estimated to be RM20Mil


Computation of common cost:

Total cost of land acquisition: Purchase price + other related costs

= 100M + 25M = 125M

For 50 hectares land used for infrastructure & common amenities

= (125/ 500) x 50 = 12.5M

Infrastructure and recreational park dev costs = 40Mil

Total common costs = 12.5M + 40Mil = 52.5

Allocation of common costs based on relative sales value

Phase APhase B

Relative Sales Val: RM200K X 1000=200M RM1Mil x 600 = 600M

Common costs allocated: (200/800) x 52.5M (600/800) X 52.5M

= 13.125M = 39.375M

Computation of cost per unit and % of completion

Accumulated property dev costs = 50M + 10.125M + 48M = 108.125M

Cost of 200 hectares land [(RM100M + RM25M) x 200/500] = 50Mil

Common cost [(12.5 + 28Mil) x (200/800)] = 10.125Mil

Direct and indirect cost incurred to date = 48Mil

Total dev costs = 108.125M + 72Mil (future costs) + 12Mil(remaining

common cost not incurred yet) = 192.125M


Budgeted cost per unit = 192.125M/1000 = 192.125K

Percentage of completion

Land cost for 200 hectares is RM125 x (200/500) = 50M

% of completion = (108.125M – 50M) = 40.9%

(192.125M – 50M)

Revenue to be recognised in year X1

Revenue = Total sales value of units sold x % completion

= (600units x 200K) x 40.9% = 49,080K

Expenses = Total budgeted costs per unit x % completion

=(192.125K x 600units) x 40.9% =47147.48K

Profit = 49080K – 47147.48 = 1932.53K


Year X2

Total estimated development cost = 150M + 20M = 170M

Accumulated development cost to date RM150M

Further cost to complete = RM20M

Budgeted costs per unit = 170M/1000 = 170K

% of completion = Total cost to date – Land cost = (150M - 50M) = 83.3%

Total estimated costs-Land cost (170M – 50M)

Rev and Exp to be recognised in X2

Total Sales Value of Units sold x % completion = 149,940K

(200K X 900) x 83.3%

Less: Total revenue recog in previous year = (63,360K)

Revenue recogd in X2 = 86,580K

Expenses: Total budgeted costs of units sold x % completion

(170K X 900) x 83.3% = 127,449K

Less: Total expenses recogd in previous year (50727.6K)

Expenses incurred in X2 (76,721.4K)

Profit 9858.6K


Progress billings: Invoice issued by developer to purchaser as

dev activities progress

: Often X reflect work performed

Para 37: When the stage of completion is det. based on ratio of

cost incurred to date to total est. property dev costs, ONLY

include costs that reflect work performed in the %

computation. Costs that do not relate to work performed include:

(i) Cost of land acquisition

(ii) Financing costs capitalised to the project

(iii) Payments made to contractors in advance of work performed under the projects


Reported Rev, Expenses and Profit attributed to proportion of

work completed – To provide useful info on extent of dev activity

and performance during the period

Para 39:

*Prop Dev costs x recogd as expense, to be recogd as asset;

*This asset to be measured at lowerof Cost and Net Realisable

Value[i.e. Selling Price – (Est. cost of complet. + Cost to make the sale)]

Estimates revocation of sales and incentives
Estimates, Revocation of Sales and Incentives

Para 40 – Estimation of costs & cost allocation need to be reviewed at end of each fin reportg period until project SUBSTANTIALLY completed

Para 41 – Change in actg est included in det of net profit and loss in accordance (FRS 108: Actg policies, Change actg estimate and errors)

Para 42 – Uncertainties in Prop Dev Activ revenues and costs estimation result in their det x be precise. Use of reasonable est essential and X undermine reliability. Hence changes in est ad j both on-going and future projects as applicable

Para 47 – Incentives


Para 5 - Sale of development come with various incentives

E.g: Rental guarantee, interest rate rebate, promotional

packages such as free air-cond and kitchen cabinets

(Read further Para 45, 46, 47 with respect to Prop

Developer obligation to provide for the incentives – Read

further FRS 137 - Provisions)

Para 47 – Other incentives or promotional costs assoc. with sale of dev units X capitalised but to expensed in P&L. E.g: Adm, maintenance fees, forfeited deposit, interest receivable taken to P&L

Inventories para 48 49
Inventories (Para 48 -49)

(i) Para 48 – Inventories of unsold completed units to be stated at lower of Cost and Net Realisable Value

(ii) Para 49 – Unsold completed units retained by entity accounted in accordance with FRS 116: Property, Plant and Equipment

Disclosure para 50 52
Disclosure (Para 50 -52)

Para 50 –

(d) Progress billings

(i) Disclose accrued billings as currents assets

E.g. Rev recog in P&L = RM4Mil, Progress Billing = RM2Mil

Excess bet rev recog and progressed billings = RM 2Mil

disclosed as current asset which is customer due to Prop


(ii) Disclose progress billings as current liabilities

E.g. Progress billing = RM4Mil, Rev recog in P&L = RM 2Mil

Excess bet progress billings and rev. recognised = RM2Mil

disclosed as current liability which is Prop Dev due to


Take home notes
Take Home Notes

(i) Def PDA – bus of acquiring land for purpose dev land to sell as vacant land or with building

(ii) Rev and Expense recog - % Completion

(iii) Change in estimation rev and costs – x prior year adj, affect current and prospective period where applicable