This Comment Letter was sent by BDO Global Coordination B.V. on behalf of BDO International, to the International Accounting Standards Board in October, 2007:
Dear Sir/Madam,
IFRIC Draft Interpretation D21 Real Estate Sales
We are pleased to have the opportunity to comment on the above draft interpretation, on behalf of BDO International1.
We support the efforts of the International Financial Reporting Interpretations Committee (“IFRIC”) to clarify the accounting for sales of units within real estate developments in the light of divergent revenue recognition practices. In general, we agree with the proposals in the draft interpretation, but have two main concerns as set out below.
It is unclear whether the IFRIC has considered the implications for other industries (such as ship building and aircraft construction), if the interpretation were to be applied by analogy under the hierarchy outlined in IAS 8, paragraphs 11 and 12. The IFRIC should consider this aspect and, if it is expected to have a material effect, either restrict the use of the IFRIC by analogy (as was done in IFRIC Interpretation 10, paragraph 9) or reconsider issuing the interpretation.
We found the guidance in paragraphs 8 and 9 unclear. This guidance, including the underlying principles, needs to be more clearly articulated.
Paragraph 8 expands on the definition of a construction contract in IAS 11 by stating that “A sale agreement meets this definition if it is an agreement for the seller to provide construction services to the buyer’s specifications”. We believe it should then go on to explain why this is so, i.e. state the principle underlying that statement.
Paragraph 9 sets out features that, individually or in combination, may indicate that an agreement is for the seller to provide construction services to the buyer’s specifications. Again, the reason that the features indicate it is a construction contract is not specified.
Given that paragraph 9(a) requires the buyer to be able to specify major structural elements, it is unclear why this feature is just a possible (but not a necessary) indicator, if the buyer is specifying the services as noted in paragraph 8.
It also seems that the discussion in paragraph BC5(b) argues that the feature in paragraph 9(b), i.e. that the seller transfers control and risks and rewards of ownership as construction progresses, would always be present in a construction contract and not just a possible indicator.
Should you wish to discuss these comments, please contact Helen Thomson of BDO Global Coordination B.V. on +32 2 778 01 30.
Yours faithfully,
BDO Global Coordination B.V.
1BDO International is a world wide network of public accounting firms, called BDO Member Firms, serving international clients. Each BDO Member Firm is an independent legal entity in its own country.
The network is coordinated by BDO Global Coordination B.V., incorporated in the Netherlands, with an office in Brussels, Belgium, where the Global Coordination Office is located.
Draft Interpretation: Comments due 5 October 2007: 
IFRIC Draft Interpretation D21 - Real Estate Sales.pdf