Annual Report 2010 - Leeden Limited

A Stronger Leeden in Asia.Notes to the Financial Statementsfor the Financial Year ended 31 December 201017. Development propertyGroup2010 2009$’000 $’000Development costs 2,361 53,188Less : Progress billings – (43,872)2,361 9,316Borrowing costs capitalised during the year 523 545In accordance with a Collaboration Agreement between the 20 existing owners of Paterson Lodge and a subsidiarycompany, the owners permitted the subsidiary company, at its own costs, to demolish the existing building on the landlocated at 20 Paterson Road, Singapore 238509, and to develop it into a new residential development comprising a newresidential building with 35 new units with certain communal facilities. The subsidiary company also undertook to delivervacant possession of 20 new units out of the 35 new units and the respective subsidiary Strata Certificates of Titles tothe respective 20 existing owners. The remaining 15 new units are transferred to the subsidiary company in considerationof the role and undertaking by the subsidiary company as stated above.A subsidiary company has provided corporate guarantees to banks for pre-existing loans obtained by certain existingowners of the development property (Note 35). These pre-existing loans are secured by the respective owners’ units. Theloans had been repaid during the year.TOP has been obtained during the year.The details of the development property are as follows:Location Site area (sq metres) Tenure of land20 Paterson RoadSingapore 2385091,077 FreeholdDevelopment costs include an amount of subsidiary company’s directors’ remuneration of $84,000 (2009: $99,000).International Financial Reporting Interpretations Committee (“IFRIC”) Interpretation and Recommended Accounting Practice(“RAP”)The International Accounting Standards Board issued IFRIC Interpretation 15 in July 2008 which becomes effective forfinancial years beginning on or after 1 January 2009. When adopted, the interpretation is to be applied retrospectively.It clarifies when and how revenue and related expenses from the sale of a real estate unit should be recognised if anagreement between a developer and a buyer is reached before construction of the real estate is completed. Furthermore,the interpretation provides guidance on how to determine whether an agreement is within the scope of FRS 11 (ConstructionContract) or FRS 18 (Revenue).RAP 11 Pre-Completion Contracts for the Sale of Development PropertyRAP 11 is still applicable in Singapore as IFRIC Interpretation 15 has not been adopted by the Accounting StandardsCouncil. It was issued by the Institute of Certified Public Accountants of Singapore in October 2005. In the RAP, it ismentioned that a property developer’s sales and purchase agreement is not a construction contract as defined in FRS11 (Construction Contract) and the percentage of completion (“POC”) method of recognising revenue, which is allowedunder FRS 11 for construction contract, may not be applicable for property developers. The relevant standard for revenuerecognition by property developers is FRS 18 (Revenue), which addresses revenue recognition generally for all types ofentities. However, there is no clear conclusion in FRS 18 whether the POC method or the completion of construction(“COC”) method is more appropriate for property developers.78