Recommendation on accounting regime for real estate businesses

Fri, 05 Jan 2018 09:17:00  |  Print  |  Email   Share:

Name of recommendations: Recommendation on accounting regime for real estate businesses

Status: Responded

Recommended by units: The CEO Group JSC in Hanoi

Official letter: 0874/PTM - VP, dated: 2017-04-20

Recommended contents:

The nature of real estate business is prolonged, the annual revenue is concentrated in the year of completion of the project, real estate products of great value, long time completion, but the provision is based on the original term and be  unreckoned the extension of debt between the parties cause difficulties for businesses.

On the other hand, in the field of budget collection, the real estate business field is considered as a special entity and must fulfill the obligation to pay VAT and CIT before recognizing revenue. The recovery of debt when entities who owe the business escape, so the business can not make a record of debt comparison, when determining the cost of EIT, the business has to eliminate this cost that is unreasonable.

Accordingly, according to the current regulations, the recognition of turnover to realize profit of shareholders is not carried out simultaneously at the same time the State collects tax.

Responded by units: The Ministry of Finance

Official letter: 6117/BTC-CST, dated: 52017-09-11

Responded contents:

Regarding the accounting regime of businesses:

   - Regarding the deadline used as a basis for determining the level of provision for bad debts:

Article 45 of the Finance Ministry's Circular No. 200/2014 / TT-BTC of December 22, 2014, guiding the enterprise's accounting regime, has stipulated that the determination of the overdue time of receivable debts is difficult. The provision is made based on the repayment period under the original purchase and sale contract, regardless of the extension of the debt between the parties.

Normally, the partner does not pay the debt properly within the original duration and has to renew the debt, there are signs / evidences that the partner may be facing financial difficulties, so according to the principle of prudence. The possibility that the receivable debt will be difficult to claim, so it is necessary to set up the provision to make financial reports that reflect the real situation of the financial situation of businesses

- - Regarding the time of recognition of real estate business turnover:

          For the real estate business being investor, the final products which business must provide to their customers under the contractual agreements are the works and works items already invested by the business, completed construction and handovered. At that time the obligation of business to new customers is considered that have been implemented, so at that time, the business will be considered to recognize revenue in accordance with the accounting standards and accounting regime.

For the amount that the business received by customers in advance, by nature it is not the amount that the business is entitled to, because if there is no work or project items to hand over to customers as agreed in the contract will be responsible for the repayment of this advance to the customer. This is also a common international practice, so it is appropriate to stipulate the time of recognition of the turnover of the investor for the real estate business in the current accounting system.


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