Application Of Percentage Of Completion Method Under New Income Criteria In Real Estate Enterprises

In July 2017,Enterprise Accounting Standards No.14-Revenue(Revision)was officially issued(hereinafter referred to as "New CAS 14").The revenue criterion has been revised many times,and finally a new revenue recognition model has been put forward.That is to say,the performance obligations stipulated in the contract have been fulfilled,and the revenue has been recognized when the customer has acquired the "control" over the commodity.Income,as one of the six elements of accounting,is used to measure the sustainability of an enterprise.Under the guidance of the original revenue criterion,the revenue recognition of the pre-sale business of real estate enterprises in China adopts the "completion confirmation method",which can be divided into three time points:the time of completion and acceptance,the time of actual delivery and the time of transfer of property rights.Regardless of which method is used,the income of real estate enterprises is confirmed at"time point".New CAS 14 puts forward the criterion that income can be recognized in a "period of time" according to whether the control of commodities is transferred in a "period of time".Therefore,the pre-sale business income of real estate enterprises is no longer limited to the time point confirmation,it will be possible to confirm in the time period(i.e.using the"percentage of completion method").This paper takes Y company as an example,bydiscussing the preconditions for real estate enterprises to use the "completion percentage method" to confirm their income under the new income criterion,and analyzing the impact of different income recognition methods under the new and old criteria on enterprises,in order to enable real estate enterprises that are about to implement the new income criterion to have a thorough understanding of the use conditions of the "completion percentage method" in advance,and to take root in it.According to its own situation,it can predict the changes brought to enterprises by the new revenue criteria.In this paper,case study and comparative study are used.Firstly,after sorting out the relevant literature and theories of revenue recognition,the process and characteristics of the pre-sale business of real estate enterprises are summarized,and the income recognition standard of the pre-sale business of real estate enterprises under the original criterna is analyzed.On this basis,the defects of the "completion confirmation method" under the original criteria are discussed,and then the new revenue criteria are analyzed.Under this condition,real estate enterprises adopt the "percentage of completion" method to confirm income,and compare the difference of income recognition of pre-sale business under the new and old criteria.Taking Y company as an example,this paper analyses how to recognize revenue of real estate enterprises under the original and new standards,and compares the impact of using "completion confirmation method" and "completion percentage method" to recognize revenue on financial data and accounting information quality of enterprises.Finally,the conclusion is drawn that under the new revenue criterion,the "percentage of completion" method is suitable for revenue recognition of qualified pre-sale business,which will improve the timeliness,comparability and relevance of accounting information,but will weaken the prudence of accounting information.Therefore,it is suggested that treasury department should require enterprises to strengthen information disclosure related to revenue recognition,and enterprises should enhance the professional ability and moral quality of financial staff in order to standardize the income recognition of real estate enterprises under the new income criteria.