Set the revenue policy and prepare the chart for it

Each set of books recognises sale revenue under a policy the company's CA chooses: the framework (Ind AS 115, the ICAI Guidance Note, or revenue on billing), point in time or over time, the event that transfers control, and how costs, brokerage, cancellations and the judgement areas are treated. The policy is effective-dated, so a change applies from a date and history stays as it was. The revenue runs then read the chart for what counts as the unit's price, which costs go to inventory, and how far construction has progressed.

Before you start

• The books exist and already hold a default policy from their begin date: Ind AS 115, Point in time, Possession handed over, occupation certificate required, progress per Tower, costs Periodic and By area, rehab, borrowing and brokerage costs capitalised (brokerage expensed directly when possession is within 12 months), onerous contracts Provide, completed units to their own inventory on, cancellations after recognition Not allowed, judgement areas off.
• You have the CA's written choices. Once a posted revenue run has used a policy it is Locked; later changes need a new policy from a later date.
• Permissions, in the role editor's words:
  • the View permission on Books and on Revenue Recognition to see the policy;
  • the Approve permission on Revenue Recognition to add, edit or delete a policy (the default Finance Lead and Administrator roles);
  • the Edit permission on Projects for the project overrides and the OC;
  • the Edit permission on Chart of Accounts for treatments and inventory roles;
  • the Edit permission on Books for cost centres;
  • the Edit permission on Revenue Recognition for cost budgets;
  • the Edit permission on Construction Stages for stages.

Steps

The policy

1. In the sidebar open Accounting > Books, open the promoter's books and choose the Revenue policy tab (the last tab). The card reads "How <books> recognises sale revenue and the costs that go with it. These are the CA's choices. A change takes effect from a date as a new policy; a policy a posted revenue run has used is locked." Below the table of policies (In force, Upcoming and Locked badges) is the in-force policy's form. See Revenue policy.
2. Click New policy from a date. The form "New policy" opens as a copy of the policy in force, dated today. (To change a row that isn't Locked, click its pencil instead.)
3. Set Effective from ("Billing and revenue runs on or after this date follow the new policy."), then:
   • Framework: Ind AS 115 ("Listed companies and companies with net worth of ₹250 crore or more."), AS (Guidance Note 2012) ("Firms, LLPs and companies below the Ind AS threshold: ICAI Guidance Note on Real Estate Transactions.") or Revenue on billing ("No deferral: every demand is revenue when issued. Use only where the CA accepts it.").
   • Method: Point in time, Over time (stages achieved) or Over time (cost incurred). Greyed out under Revenue on billing.
   • Progress measured per: Project or Tower, for an over-time method.
4. For Point in time, under Point in time ("The booking event that transfers control of the unit."), choose Recognise on: Possession offered, Possession handed over, Deemed handed over (then Days after the offer, "The agreement's deemed-possession period.") or Conveyance registered. Leave Occupation certificate required on unless the CA says otherwise: "No possession can be offered, and no revenue recognised, before the tower's (or project's) OC date."
5. For an over-time method, under Over time, set the three Guidance Note thresholds (shown only under AS (Guidance Note 2012)): Cost incurred at least (%), Area sold at least (%) and Realised per contract at least (%). For Over time (cost incurred), decide whether to Count land and development rights in the cost measure.
6. Under Costs, choose Costs into inventory (Periodic or Perpetual), Cost of sales shared by (By area or By sale value), Rehab costs (rent, corpus, shifting, PAP) and Borrowing costs (Capitalise or Expense), Onerous contracts (Provide or Flag only), and the Completed units to their own inventory switch.
7. Under Brokerage and cancellation, choose Brokerage and other costs of obtaining a contract (Capitalise or Expense), Expense directly when possession is within (months) ("Practical expedient: 0 turns it off."; greyed out when brokerage is expensed) and Cancelling after revenue is recognised (Not allowed or Sales return).
8. Under Judgement areas ("Off unless the CA has concluded otherwise."), switch on Significant financing component (Ind AS 115 only; then fill Discount rate (% a year) and Only when payment runs ahead by more than (months)) or Rehab units as revenue (non-cash consideration) only if the CA has concluded so (see Recognise rehab units as non-cash consideration). Type the CA's memo reference in Notes.
9. Click Add policy (Save policy when you edited a row). You see "Revenue policy from <date> saved." and the row appears in the table, Upcoming if its date is in the future.

The organization default, project overrides and the OC

The method and trigger are resolved in three levels: the project's own setting, else the organization's default, else this policy. The organization default lives on the Projects card under Settings > Organization (Organization), section Revenue recognition: Revenue method and Recognise revenue on, each left on "Books' revenue policy" unless the CA wants one choice for every project whatever its books say. Changing either saves at once with "Project defaults saved." (the Edit permission on Organization Settings).

10. For a project that follows a different method (for example a commercial tower sold over time), or to record its occupation certificate, open it from Projects and choose its Settings tab. See Project settings. Under Accounting, the hints under Revenue method and Recognise revenue on show what applies today, for example "Blank = Point in time (the promoter's books policy)." or "(the organization's setting)".
11. Pick Revenue method or Recognise revenue on only to override that for this project ("Override for this project only, e.g. a commercial tower sold over time."); the placeholder "Inherited" means the organization's default, else this policy, applies. Under Possession, fill Occupation certificate no. and OC date ("Blank until the OC is received.") once the OC arrives. A tower with its own OC takes it on the Structure tab's tower panel instead.
12. Click Save settings. You see "Project settings saved."; a field you set now reads "Currently <value>; clear the field to go back to <inherited value> (the promoter's books policy)." (or "the organization's setting"). Clear it and save again to go back to inheriting.

The chart, cost centres, budgets and stages

13. In the sidebar open Accounting > Chart of Accounts, pick the books and choose the Component mappings tab. The Revenue column shows each sale and tenant charge's treatment: the unit price components arrive With the unit via 2100, the differential-area charge via 2110, and deposits and society charges as Pass-through. See Component mappings.
14. For each charge whose treatment the CA wants different, click its pencil, choose the Revenue treatment (With the unit, On billing or Pass-through) and, for With the unit, the Contract liability ledger (blank means 2100), and click Save mapping. You see "<component> mapped." The details are in Map a charge component.
15. Choose the Ledgers tab. For each expense ledger that carries project cost, click its pencil, choose the Inventory role (Construction cost, Rehab cost or Borrowing cost; blank reads "Stays in the P&L") and click Save changes. You see "Ledger <code> updated." The seeded construction and rehab expense ledgers and 5530 already carry a role. See Ledgers.
16. On the books' Cost centres tab, check there is a cost centre for each project (and for each tower when progress is per tower). If not, click Mirror projects and Create cost centres; you see "<n> project and <n> tower cost centre(s) created." The runs find a project's costs by its cost centre. See Cost centres.
17. On the Budget cost card on the project's Settings tab, click Add budget, fill Scope (Whole project or a tower), Effective from, Construction & development cost ("Excluding land: what progress is measured against.") and Land, development rights & rehab, and click Save. You see "Budget of ₹<total> from <date> saved." A budget is required for Over time (cost incurred); without one, cost of sales uses the cost inventoried to date. See Budget Cost.
18. For Over time (stages achieved), on the project's Construction Stages tab give each stage its Share of total and, as work finishes, click Mark completed on it. A tower's own stages are used for its units when it has any, else the project-wide stages. See Construction Stages.

What happens next

• From the effective date, demands for With the unit charges credit the contract liability instead of revenue (unless the framework is Revenue on billing), and commissions approved may be capitalised as contract acquisition costs.
• Every revenue run with a period end on or after the date computes under this policy, unless the organization's Projects card or the project's own Settings tab sets a method or trigger (project first, then organization, then this policy). See Prepare, review and post a revenue run.
• The first posted run that uses the policy locks it: the row shows Locked and its form reads "A posted revenue run has used this policy, so it stays as it is. To change the policy, add a new one from a later date."
• A policy that isn't locked can be deleted with the bin icon ("Delete revenue policy?", "Dates this policy covered fall under the policy before it. The last policy of a set of books cannot be deleted."); you see "Policy deleted."
• With Occupation certificate required on, possession can't be offered on a booking until an OC covers its unit.

If something goes wrong

• "A posted revenue run has used this policy; add a new policy from a later date instead", "These books already have a revenue policy from that date", "A set of books always keeps one revenue policy; edit it instead", "The significant financing component is an Ind AS 115 requirement; turn it off for this framework" or "Give the discount rate for the financing component": see Revenue policy cannot be changed or deleted (trouble.accounting.revenue-policy-locked).
• "The contract liability ledger must be a liability" on Save mapping: the Contract liability ledger you chose sits under an asset, equity, income or expense group. Pick a ledger under a liability group, or leave it blank for 2100.
• "A budget for the same scope already starts on that date; edit it instead" on the budget, or "<project>: the cost method needs a cost budget (Project > Settings > Budget cost)" on a run: see The cost method needs a cost budget (trouble.accounting.cost-budget-missing).
• "Only a user allowed to approve revenue (REVENUE:approve) can change the policy." on the form, or "You do not have permission to view the revenue policy. Ask your administrator.": your role lacks the Approve (or View) permission on Revenue Recognition. See No access (trouble.admin.no-access).

Related

• Revenue policy
• Project settings
• Organization
• Component mappings
• Ledgers
• Cost centres
• Budget Cost
• Construction Stages
• Map a charge component
• Prepare, review and post a revenue run
• Recognise rehab units as non-cash consideration