Oct 12, 2012
Revised revenue standard to affect construction sector firmsBack
Construction|Engineering|Africa|Africa|South Africa|Theunis Schoeman
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The introduction of a new accounting standard from January 1, 2015, will require companies to identify separate performance obligations in a contract for accounting purposes.
The standard, although a relatively minor adjustment for most companies, assumes huge significance in the building, construction and civil engineering industries, where multiple performance obligations are more the norm than the exception.
“While these revisions will not affect business operations, they will inevitably create additional costs and require greater preparation of company financial statements. This brings South Africa in line with what is happening globally and is an element of the process of global harmonisation,” he explains.
It appears from the revised draft that cognisance has been taken of the industry’s concerns that were based on the first draft.
The draft clarifies that, where a company incurs incremental costs in obtaining a contract, these costs should be capitalised and therefore amortised over the period of the contract. Further, in the case of a contract that is valid for less than a year, these costs can also be entirely expensed within the period during which they are incurred.
“As a result, I recommended that affected companies start implementing it for periods from January 2013 onwards to ensure they have that retrospective information at hand,” he says.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
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