Significant financing component
An Ind AS 115 judgement: when buyers pay well ahead of possession the developer is effectively borrowing from them, so each revenue run accrues notional interest on every cleared receipt at the policy's rate, books it as interest expense against the contract liability, and adds it to the unit's price so it is recognised as revenue with the unit.
Significant financing component
When a buyer pays a large part of the price two or three years before getting the flat, the developer has had the use of that money. Ind AS 115 treats the gap as a loan from the buyer: the developer records interest on the advances, and the unit's revenue is grossed up by the same amount, because the buyer is really paying the cash price plus the interest they forgo. NirmaanOne accrues this notional interest each period on the cleared receipts of every booking, once the CA has switched it on.
How it works in NirmaanOne
Where it is set
On the promoter's books, tab Revenue policy, section Judgement areas (the Approve permission on Revenue Recognition):
- toggle Significant financing component, available only under Ind AS 115 ("Interest on advances the buyer pays well ahead of possession, accrued each period."; on the other frameworks it reads "An Ind AS 115 requirement: not available under this framework"). Saving it on under another framework is refused: "The significant financing component is an Ind AS 115 requirement; turn it off for this framework".
- Discount rate (% a year), 0 to 50, required while the toggle is on ("The rate the buyer would borrow at."; missing: "Give the discount rate for the financing component").
- Only when payment runs ahead by more than (months), 0 to 120, default 12 ("Practical expedient: shorter gaps are ignored.").
What each run computes
For every active booking in the run, the interest to date is the sum over its cleared receipts dated on or before the period end of
receipt amount × rate ÷ 100 × days ÷ 365
where days run from the receipt's payment date to the earlier of the period end and the day control of the unit passed under the policy's trigger (see Revenue recognition). The sum is rounded half-up to the paise at the end, not per receipt. A receipt is left out when the whole calendar months from its date to the expected possession (the control date once known, else the project's Expected possession; a part month counts as a whole one) are not more than the policy's months. Receipts dated after the control date add nothing. A cancelled booking's interest drops to zero, unwinding what earlier runs accrued.
The run then:
- posts, per project, the "financing component" journal for the change since the last posted run: Dr Interest Expense (5530) / Cr Contract Liability - Sale of Units (2100);
- adds the interest to date to the booking's transaction price as a component called FINANCING (revenue ledger 4100, liability ledger 2100) and to its Billed figure, so the Price, Liability and, at recognition, the revenue all include it. It is recognised with the unit, at the booking's progress, like every other component.
The interest posted by a run stays in 5530: the inventory transfer only moves balances posted outside revenue runs, so it is not capitalised into work-in-progress. The Remaining obligation report's Booked figure includes the component once a posted run has lined the booking.
Why
Without it, a developer who collects 90% of the price up front reports the same revenue as one who collects on possession, although the first has financed construction with customers' money. The standard makes the financing visible as interest cost, with the revenue correspondingly higher, so margins are comparable. The twelve-month expedient (Ind AS 115 para 63) keeps the ordinary construction-linked plan, where each installment is close to the work it pays for, out of the calculation.
Example
Sea Breeze Developers LLP follows Ind AS 115, Point in time on Possession handed over, and posts a revenue run each quarter. The CA adds a policy from 1 January 2027 with the financing component on, Discount rate 10 and months 12. Booking BK-2026-27-00007 (price ₹1,29,50,000.00, project Expected possession 31 December 2028) has two cleared receipts: ₹12,95,000.00 on 15 September 2026 and ₹19,42,500.00 on 20 November 2026.
Run to 31 March 2027, the first under the new policy, so it catches up on the interest since each receipt. Neither receipt is within 12 months of 31 December 2028 (the first is 27 full months plus a part month away), so both count.
| Receipt | Days to 31 Mar 2027 | Interest |
|---|---|---|
| ₹12,95,000.00 on 15 Sep 2026 | 197 | ₹12,95,000.00 × 10 ÷ 100 × 197 ÷ 365 = ₹69,894.5205… |
| ₹19,42,500.00 on 20 Nov 2026 | 131 | ₹19,42,500.00 × 10 ÷ 100 × 131 ÷ 365 = ₹69,717.1232… |
| To date | ₹1,39,611.6438… → ₹1,39,611.64 |
Journal "financing component": Dr Interest Expense ₹1,39,611.64 / Cr Contract Liability - Sale of Units ₹1,39,611.64. The booking's line now shows Price ₹1,29,50,000.00 + ₹1,39,611.64 = ₹1,30,89,611.64, with the same amount added to Billed and Liability (progress is still 0%).
Run to 30 June 2027. Days become 288 and 222: ₹1,02,180.8219… + ₹1,18,146.5753… = ₹2,20,327.3972… → to date ₹2,20,327.40; this run = ₹2,20,327.40 − ₹1,39,611.64 = ₹80,715.76, posted the same way.
A receipt of ₹19,42,500.00 cleared on 15 January 2028 would be left alone: 11 full months plus a part month to 31 December 2028 is 12, not more than 12. One cleared on 10 December 2027 (13 months) would count.
At handover on 20 January 2029 the interest stops accruing on that day. The run to 31 January 2029 recognises the whole price including the financing component: the FINANCING share goes to Sale Revenue - Units (4100) and the matching liability in 2100 is debited, alongside the unit's own charges.
Where you see it
- Revenue policy: the toggle, Discount rate (% a year) and Only when payment runs ahead by more than (months).
- Revenue run: the booking's Price, Billed and Liability include the component; the "financing component" journals under Journals.
- Voucher: the Dr 5530 / Cr 2100 journal.
- Payments: the cleared receipts and their dates that drive the calculation.
- Edit project: Expected possession, the yardstick for the practical expedient until control passes.
- Booking overview: the Possession card whose dates end the accrual.
- Remaining obligation: Booked includes the component.
Related
Related
- Revenue policyScreen
The CA's effective-dated choices on how the books recognise sale revenue and the costs that go with it: framework, method, possession trigger, OC rule, cost treatments and judgement areas.
- Revenue runScreen
One period close: what each booking and member offer recognises, the journals and cost moves it posts, the subjects it left out, and the actions to recompute, post, reverse or delete it.
- VoucherScreen
One voucher with its lines and bill allocations, its reversal links, its history, and the actions to post, reverse, cancel or delete it.
- Remaining obligationScreen
The Ind AS 115 disclosure of revenue still to come from what is already booked: each live booking and member offer's price less what the posted revenue runs have recognised, per project, banded by the financial year of the project's expected possession.
- Edit projectScreen
Change a project's facts on one page: basics, site address, land survey details and expected possession, and, on a redevelopment, the development agreement date and the fair value of the development rights. The settings the project inherits from the organization live on its Settings tab.
- Booking overviewScreen
A booking's home page: the applicant and unit, parking, dates, money summary, termsheet status and possession, with the buttons to edit the booking, see its history, jump to the opportunity or cancel it.
- PaymentsScreen
Every receipt and payout of the chosen books, with filters and search, and the buttons to record a receipt, record a payout or open the payout runs, the RERA sweeps, the TDS credits and the escrow withdrawals.
- Revenue recognition: policy, point in time vs over time, and revenue runsConcept
Each set of books carries an effective-dated revenue policy (framework, method, possession trigger, cost and brokerage treatments, judgement areas) chosen by the CA; a revenue run is the period close that computes every booking's and member offer's progress under it, recognises the catch-up revenue, cost of sales and brokerage, and posts the journals.
- Contract liability, contract asset and the transaction priceConcept
A booking's transaction price is the sum of its charges treated "With the unit"; while revenue is deferred, demands for those charges are credited to a contract liability (billed ahead of revenue), a revenue run debits it as revenue is recognised, and revenue recognised ahead of billing sits in the contract asset.
- Receipts and payouts: allocation, clearing and the UTRConcept
A receipt is recorded as Pending and settles the payer's open demands by itself, oldest due first; a payout is allocated to commissions or member rows by hand. Both post their voucher only when cleared and can be bounced afterwards; the UTR is the bank's transfer reference, typed on NEFT-style payments and per payout when a payout run is cleared.
- Expected possession date and charges at possessionConcept
The project's expected possession date is when the charge groups a pricing plan collects "at time of possession" fall due: one undivided row per charge, owed from booking, outside the buyer's payment plan, re-dated on every open booking when the date changes.