IAS 18 — Real estate sales

Date recorded:

The IFRIC considered a revised draft of a Draft Interpretation addressing the decisions and suggestions made by the IFRIC at the March 2007 meeting.

Distinguishing between IAS 11 construction contracts and IAS 18 agreements of purchase and sale

The IFRIC discussed the proposed indicators that would help determine whether a sale if real estate is a construction contract within the scope of IAS 11 Construction Contracts or an agreement of purchase and sale within the scope of IAS 18 Revenue.

After a rather lengthy discussion, the IFRIC agreed that features that, individually or in combination, might indicate that an agreement is for the provision of construction services to the buyer's specifications, rather than the sale of goods (constructed real estate), would include:

  1. the buyer being able to specify the major elements of the design of the real estate before construction begins and/or alter it while construction is in progress (whether it exercises that ability or not)
  2. the buyer obtaining the risks and rewards of ownership or control over the work in progress as construction progresses.

There was some discussion of possible sub-indicators of (b), such as whether, in the event of the contractor/developer defaulting on the contract, the buyer had a right to sue for specific performance (suggesting an IAS 11 contract) or a right to monetary damages (indicating an IAS 18 contract). The staff agreed to work with the suggestions made by IFRIC members.

The IFRIC also agreed that the list of indicators should not suggest any form of hierarchy or create any rebuttable presumptions (that is, they are indicative only).


The IFRIC Chairman asked whether, based on the provisional Draft Interpretation and the discussions today, any IFRIC members would not support the Draft Interpretation. None of the IFRIC members indicated a dissent.

Next steps

The staff will present a revised Draft Interpretation to the IFRIC as soon as possible, with the intention that it will be passed to the IASB for negative clearance as provided in the IFRIC's Due Process Handbook. Provided that the IASB does not object to its publication, a Draft Interpretation should be published by July 2007.

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