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Consult Construction

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Builders Association of India (vs.) Union of India and ORS.

Appeal No. 8035/2016, High Court of New Delhi


Delay Condoned.

Apprehension of the petitioner appears to be that without identifying the beneficiary workmen, the contribution is being sought. Without identification, the petitioner will not be liable to make the contribution, it is submitted. That process of identification will arise only at the stage of enquiry that is to be conducted by the respondent- Organisation. Therefore, it is made clear that during the process of enquiry conducted by the respondent- Organization, the steps will also be taken to identify the workmen either of the petitioner or engaged through contractor.

Needless to say that the Organization will ensure that the contribution taken from the petitioner will actually go to benefit of the employees concerned.

Subject to the above observations, special leave petition is dismissed. Pending application(s) shall stand disposed off.

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Consult Construction has successfully organised a seminar on Indirect Taxation of Works Contract. The seminar received a very good response with delegates from companies like :-
1. L&T
2. Reliance
3. Transformers & Rectifiers
4. MS Khurana Engg.
5. Adani Infrastructure
6. Neela Infrastructure
7. Hindustan Petroleum Corp. Ltd
attending the same in full numbers. Faculty CA Sandesh Mundra along with Adv Samir Siddhpuria addressed the first session on VAT and CA Sandesh Mundra addressed the second session on Service Tax. There were various posers up for discussion in between for better subject clarity. The sessions were very interactive with various issued being brought to the fore for brain storming.

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Posted by on in Accounting


IAS-11 - Construction Contracts

Objective of IAS 11

The objective of IAS 11 is to prescribe the accounting treatment of revenue and costs associated with construction contracts.

What is a Construction Contract?

A construction contract is a contract specifically negotiated for the construction of an asset or a group of interrelated assets. [IAS 11.3]

Under IAS 11, if a contract covers two or more assets, the construction of each asset should be accounted for separately if (a) separate proposals were submitted for each asset, (b) portions of the contract relating to each asset were negotiated separately, and (c) costs and revenues of each asset can be measured. Otherwise, the contract should be accounted for in its entirety. [IAS 11.8]

Two or more contracts should be accounted for as a single contract if they were negotiated together and the work is interrelated. [IAS 11.9]

If a contract gives the customer an option to order one or more additional assets, construciton of each additional asset should be accounted for as a separate contract if either (a) the additional asset differs significantly from the original asset(s) or (b) the price of the additional asset is separately negotiated. [IAS 11.10]

What Is Included in Contract Revenue and Costs?

Contract revenue should include the amount agreed in the initial contract, plus revenue from alternations in the original contract work, plus claims and incentive payments that (a) are expected to be collected and (b) that can be measured reliably. [IAS 11.11]

Contract costs should inclulde costs that relate directly to the specific contract, plus costs that are attributable to the contractor's general contracting activity to the extent that they can be reasonably allocated to the contract, plus such other costs that can be specifically charged to the customer under the terms of the contract. [IAS 11.16]


If the outcome of a construction contract can be estimated reliably, revenue and costs should be recognised in proportion to the stage of completion of contract activity. This is known as the percentage of completion method of accounting. [IAS 11.22] To be able to estimate the outcome of a contract reliably, the enterprise must be able to make a reliable estimate of total contract revenue, the stage of completion, and the costs to complete the contract. [IAS 11.23-24]

If the outcome cannot be estimated reliably, no profit should be recognised. Instead, contract revenue should be recognised only to the extent that contract costs incurred are expected to be recoverable and contract costs should be expensed as incurred. [IAS 11.32]

The stage of completion of a contract can be determined in a variety of ways - including the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, surveys of work performed, or completion of a physical proportion of the contract work. [IAS 11.30]

An expected loss on a construction contract should be recognised as an expense as soon as such loss is probable. [IAS 11.22 and 11.36]


  • amount of contract revenue recognised; [IAS 11.39(a)]
  • method used to determine revenue; [IAS 11.39(b)]
  • method used to determine stage of completion; [IAS 11.39(c)] and
  • for contracts in progress at balance sheet date: [IAS 11.40]
    • aggregate costs incurred and recognised profit
    • amount of advances received
    • amount of retentions


The gross amount due from customers for contract work should be shown as an asset. [IAS 11.42]

The gross amount due to customers for contract work should be shown as a liability. [IAS 11.42]

Note:  Please note that these summaries are only for reference purposes and are not a substitute for the entire IFRS/IAS. Kindly read the whole text of IFRS/IAS before consulting these summaries.

Summaries are courtesy of Deloitte.


Sandesh Mundra
Chartered Accountants

+91 94260 24975
- Interestingly, you have to loose to prove that you are a true sport.

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Building sustainable value — for today and tomorrow

The Canadian engineering and construction (E&C) industry is a complex, rapidly evolving sector offering high risk and high rewards to players at all levels. CEOs in this industry face constant pressure to identify and exploit opportunities for growth, manage risk, control costs and attract and retain skilled people who can complete projects on time and on budget. It isn't easy.

To stay ahead of competitors, E&C companies need to be aware of how their industry is changing and the forces that are driving that change. The issues having the largest impact on the E&C sector include:

On our Global E&C website, we discuss other major issues affecting the sector, including:

These are not insignificant challenges. It takes industry-specific knowledge and dedication to continued growth to manage these pressures and create sustainable value.


Sandesh Mundra
Chartered Accountants

+91 94260 24975
- Interestingly, you have to loose to prove that you are a true sport.

Virus Warning: Although our firm has taken reasonable precautions to ensure no viruses are present in this email, the firm cannot accept responsibility for any loss or damage arising from the use of this email or attachment."

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a) Accounting Standard / Guidance Notes

The Accounting Sector applicable to this industry which works purely on contractual basis is AS-7 – Accounting for construction contracts. The standard emphasizes on Percentage completion Method Accounting (POCM).

Let us try and understand the accounting intricacies with a small example:-

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We are Ahmedabad based professional consulting firm. We are providing various services to Construction, Real Estate and Project Companies in various areas like Indirect Taxation – Service Tax & Multi state VAT consultancy, ERP implementation, Site & Management audit, Designing Tender & other related contractual documents etc.