Key takeaways
- Condo costs fall into six phases, and each phase requires a decision to capitalise or expense
- Land and construction costs sit in WIP under TAS 2, interest follows TAS 23, and incremental commissions are recognised as a contract cost asset under TFRS 15
- Advertising and marketing materials are expensed immediately
- Money received from customers is a liability until control is transferred, which is generally the ownership transfer day
A condominium development has a long cost cycle, from land acquisition, design, permitting and construction through presales to ownership transfer. For each item you must decide whether to capitalise or expense it under the relevant standards: TAS 2, TAS 23 and TFRS 15. This article sets out a six-phase framework with sample figures, so that project executives and the finance team can see how the recording works as a system. The account codes use the 11010–11060 structure as an example.
Phase 1: Land acquisition
Costs directly related to acquiring the land are recorded in the WIP-Land account until the condominium units are transferred to customers. Under TAS 2, the cost of inventory comprises purchase costs, conversion costs and other costs incurred in bringing the inventory to its present location and condition.
| Item (example) | THB million |
|---|---|
| Land price | 170.0 |
| Transfer fee and legal fees | 0.8 |
| Land tax during development | 3.2 |
| Total land cost (11010) | 174.0 |
Phase 2: Pre-construction work (design, EIA, permits)
Record these in WIP-Soft Costs, because they are directly related to bringing the project to a saleable condition. These costs would not be incurred if there were no project.
| Item (example) | THB million |
|---|---|
| Architectural design fees | 6.5 |
| Project management fees (only the portion directly related to the project) | 22.0 |
| Construction management consultancy fees | 2.5 |
| EIA report fees and legal fees | 0.6 |
| Total WIP-Soft Costs (11030) | 31.6 |
Phase 3: Construction
| Item (example) | Account | THB million |
|---|---|---|
| Main construction contract | 11020 | 215.0 |
| Piling, soil testing and civil works | 11020 | 13.0 |
| Other direct construction work | 11020 | 18.0 |
| Depreciation of vehicles used on site | 11020 | 0.2 |
| Total WIP-Hard Construction | 246.2 | |
| Interest on construction loans (IDC) | 11040 | 0.2 |
TAS 23 requires borrowing costs directly attributable to a qualifying asset to be capitalised. Capitalisation begins when the conditions are met and stops when substantially all the activities needed to prepare the asset for sale are complete. After that, interest is expensed.
Sales gallery: In principle, a sales gallery is not part of the units being sold, so it should not automatically go into WIP. If it is a temporary building used for more than one period, consider treating it as PPE and depreciating it over the sales period. Only work that remains as part of the property delivered can go into WIP. In the article's example the amount is THB 60 million, shown separately from the WIP balance. Agree the classification with the auditor from the outset.
Phase 4: Presales and marketing
This phase is the most complex, because the costs fall clearly into two groups
Group A: capitalise under TFRS 15 paragraph 91 (costs to obtain a contract)
These must be incremental costs that would not have been incurred without a contract with a customer.
| Item (example) | Accounting treatment | THB million |
|---|---|---|
| Commission to external agents | 11050 Paid when a contract has been signed. | 43.0 |
| Commission to sales staff | 11050 Only the portion tied to closing a contract. Base salary is an expense. | 4.0 |
Group B: expense immediately
Selling expenses are excluded from inventory cost under TAS 2 paragraph 16, and expenditure on advertising and promotion is expensed as incurred under TAS 38 paragraph 69
| Item (example) | THB million |
|---|---|
| Advertising costs | 2.5 |
| Marketing materials and collateral | 7.5 |
| Sponsorships or donations for PR | 6.5 |
| Marketing activities and events | 1.0 |
| Total selling expenses | 17.5 |
Rule of thumb: If an expense cannot be linked to a specific condominium unit sale contract, recognise it as an expense immediately.
Phase 5: Sales and revenue recognition
When a customer signs the sale and purchase agreement (SPA), the money received is a contract liability, not revenue, and WIP remains on the balance sheet. For Thai condominium unit sales, the performance obligation is generally satisfied at a point in time when control is transferred, which is the ownership transfer day. Recognition over time under TFRS 15 paragraph 35 must meet specific conditions, which have to be assessed from the contract and the law.
Example: Cumulative customer receipts of THB 700 million are shown under liabilities and are not recognised as revenue until ownership transfer.
Phase 6: Construction completion and ownership transfer
- Release WIP to COGS in proportion to the units transferred
- Amortise the contract cost asset (11050) to selling expenses as units are delivered
- Transfer the contract liability to revenue
- Stop capitalising IDC when the project is ready for sale
Cost position summary (sample project)
| Item | THB million | Recording status |
|---|---|---|
| WIP-Land (11010) | 174.0 | Capitalise |
| WIP-Hard Construction (11020) | 246.2 | Capitalise |
| WIP-Soft Costs (11030) | 31.6 | Capitalise |
| WIP-Borrowing Costs (11040) | 0.2 | Capitalised subject to the TAS 23 conditions |
| Total WIP | 452.0 | |
| Sales Gallery | 60.0 | Separate from WIP; consider PPE or expense |
| Agent Commission | 43.0 | Contract Cost Asset (11050) |
| Customer receipts | 700.0 | Liability; recognised on ownership transfer |
| Revenue already recognised | 0.0 | Awaiting handover |
Recommendations before the year-end close
- Check that eligible agent commissions are not left in expenses, and reclassify them to the contract cost asset under TFRS 15 paragraph 91.
- Set a policy for amortising the contract cost asset that is consistent with the unit handover schedule.
- Review marketing and sales gallery costs to make sure no items that should be expensed remain in WIP.
- Set the date the project is ready for sale, so that IDC capitalisation stops under TAS 23.
- Review the cut-off of customer receipts against contracts and transfers.
Conclusion
The condo cost cycle requires an understanding of several standards at once. The classification between capitalising and expensing directly affects the balance sheet, financial ratios and the tax base. Setting up the accounting system from the first phase, a chart of accounts that clearly separates WIP, and continuous communication with the auditor will allow the project to close its accounts correctly and reflect true operating results.