GROUP 2
Real Estate: Rental or Rental Property Business is a specialized industry
that the owners let their properties to be used and rented by their clients in
exchange for money.
Here are the four types of Rental Properties:
Residential – for dwelling purposes.
Commercial – for selling goods and offering services purposes.
Industrial – for manufacturing, storing, and production purposes.
Land – for special purposes.
The Rental Property's Operations are simple yet extensive and
risky, but with proper management and planning, the income can be
doubled or tripled or even earn much more than you invest.
Here are the three components of Real Estate – Rental’s operations:
1.
Managing Tenants
2.
Managing Property Maintenance and Inspections
3.
Managing Finances
The International Accounting Standards Board (IASB) issued IFRS
15 which provides a comprehensive framework for recognizing
revenue from contracts with customers and it took effect on
January 1, 2018.
IFRS 15 - Revenue from Contracts with Customers
IFRIC 15 - Agreements for the Construction of Real Estate
IAS 40 - Investment Property
IAS 2 - Inventories
Republic Act (RA) 6552 - "Realty Installment Buyer Act."
The rules for recognition of real estate that meets the definition of
investment property are similar to those for all other assets.
Investment properties are initially recognized at cost, including
transaction costs. [IAS 40 para 20].
Cost is the amount of cash or cash equivalents paid or the fair
value of other consideration given to acquire an asset at the time of
its acquisition or construction. [IAS 40 para 5].
Segment disclosures
Public entities are required to disclose, in their financial
statements, information regarding the nature and financial effects
of activities in which they engage and the economic environments
in which they operate. The disclosures should be consistent with
the information presented to the entity’s chief operating decision
maker (CODM). Information is presented for the entity’s reportable
segments.
1. Meet the owners and inquire all necessary information such
as operations, status of rental contracts, legal structure, etc.
2. Analyze the financial reports and inquire the responsible
person for explanation about the unusual findings.
3. Review & inspect major transactions, rental contracts, and
changes to internal controls & processes.
4. Check and Re-calculate suspecting numbers in the
documents.
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