In previous articles on National Accounting Standard No. 8[1], Russell Bedford Poland, published on the website, mentioned the specificity of development activities and types of development contracts. While continuing to discuss some of the issues raised in this document, it is also worth paying attention to presentation and disclosure. This topic is described in Chapter X of the CRS No. 8.
Before discussing the above issue, it is also worth recalling the definition of a development project. As defined in point 3.1.
CRS No 8, The development project is “a development project within the meaning of the Act of 16 September 2011 on the protection of the rights of the purchaser of a dwelling or a single family house (Journal of Laws of 2019, item 1805 as amended) hereinafter referred to as the Buyer's Rights Protection Act, as well as any other process (action), resulting in the implementation of which, for the buyer (natural or legal person) or purchasers established or transferred, separate ownership of a dwelling or premises of a different purpose (e.g.
office, commercial, warehouse) as well as ownership of a building or part of it, together with the land or right of perpetual use of the land and the corresponding infrastructure facilities.
The development project includes construction or reconstruction within the meaning of the Act of 7 July 1994 Construction law (Journal of Laws of 2020, item 1333), as well as the factual and legal activities necessary for the commencement of construction (reconstruction) and the putting into service of the building and, in particular, the acquisition of the rights to the property on which the construction (reconstruction), the preparation of the construction project or the acquisition of the rights to the construction project and the obtaining of the required administrative permits laid down by separate provisions.
A part of a development project may be an investment task, the object of which is to build or rebuild one or more buildings, if these buildings are to be put into service at the same time, according to the development project schedule, and form an architecturally-built whole.
If an investment task has been identified, the explanations concerning the development project shall apply mutatis mutandis to the investment task.’
Value of land as part of an unfinished development project, according to point 10.1. CRS No 8, shall be shown at the purchase price or at fair value:
- 1) in the balance sheet, under the heading ‘Semi-products and products in progress’, under the additional heading ‘including: Building facilities’,
- 2) in the profit and loss account (in the comparative option) under the headings ‘Product state change’ and ‘Use of materials and energy’ under the additional heading ‘including: Building facilities’.
The sale of undeveloped land or the right of permanent use shall be demonstrated in accordance with point 10.2. CRS No 8, in the profit and loss account:
- 1) if the land or right was included in the goods as the sale of the goods (income and value of the goods sold),
- 2) if the land or right was included in the investment in real estate or fixed assets, as a gain/loss from the disposal of non-financial fixed assets.
In turn, the following data should be provided in the additional information, in order to provide clear and transparent information on the effects of the development projects:
- for development projects the object of which is valued in accordance with the principles of measuring the cost of manufacturing finished products:
- the total cost of manufacturing development projects in the course of production; and
- if the accruals for future liabilities for the additional costs associated with the development project currently under way in the part of the property sold are established, the total amount of those additional costs to which the developer is legally or habitually obliged shall be disclosed,
- for contracts valued in accordance with CRS No 3[2] (National Accounting Standard No. 3 – „Uncompleted construction services) by step or zero profit method[3]:
Revenue determined according to CRS No 3
Costs determined according to CRS No 3
Accrued claims
Costs incurred
Reserve for losses on economic transactions in progress
Total outstanding development projects
- of which advanced
- of which zero profit method
This table is presented on the basis of a similar table at the end of Chapter X of the National Accounting Standard No. 8.
[1] Communication from the Minister of Finance, Funds and Regional Policy dated 11 December 2020 on the announcement of a resolution of the Accounting Standards Committee on the adoption of an update of National Accounting Standard No. 8 „Development activities”, Official Journal of the Minister of Finance, Funds and Regional Policy, Warsaw, day 31 December 2020, item 38.
[2] Communication from the Minister of Finance on 20 June 2018 on the announcement of a resolution of the Accounting Standards Committee on the adoption of an update of National Accounting Standard No. 3 „Unfinished construction services”, Official Journal of the Minister of Finance, Warsaw, on 10 July 2018, item 76.
[3] According to point 3.13. National Accounting Standard No. 3, Contract revenue, also called estimated revenue, is the amount of:
corresponding to the product of the level of progress of the construction service at the balance sheet date and the price agreed in the contract (fixed, costs plus), possibly modified due to changes in the scope of work, claims, bonuses and contractual penalties (in which case the method of progress is referred to), or
the cost of the contract incurred until the balance sheet date, which is highly likely to be covered by the contracting authority, where it is not possible to reliably determine the level of progress of the construction contract (in which case the zero profit method is referred to).