Commissions on off-plan sales

Broker-driven off-plan sales models mean commission asset balances can be material and span multiple years before release; mismatched expensing distorts selling-expense trends and margin-by-vintage analysis, and cancelled-contract commission assets left on the books overstate assets.

Is the commission genuinely incremental, would it not have been incurred if this specific contract had not been signed? Does the amortization/release pattern of the capitalized commission follow the revenue recognition conclusion already reached for that project (over-time or point-in-time)? On contract cancellation, is the unamortized commission written off immediately, net only of enforceable clawback from the broker? Are capitalized commission assets tracked per contract/unit rather than on a portfolio-average basis?

1) Confirm the commission is incremental, i.e. it would not have been incurred if the specific contract had not been obtained (a broker commission tied to a signed sale typically qualifies; a fixed sales-team salary does not). 2) Recognize the incremental commission as an asset (a cost to obtain a contract) rather than expensing it immediately, unless the amortization period would be one year or less (in which case the practical expedient allows immediate expensing). 3) Determine the amortization/release pattern for the capitalized commission by reference to the pattern of the related revenue recognition already concluded for that project (per RECON-001): released in full at handover for point-in-time projects, or progressively as revenue is recognized for over-time projects. 4) On contract cancellation, write off the remaining unamortized capitalized commission immediately, net of any clawback the developer is contractually entitled to and expects to enforce and collect from the broker. 5) Track capitalized commission assets per contract/unit so releases and write-offs can be matched precisely rather than using a portfolio-average approach that risks mismatching cancelled or delayed units.

Measurement base: capitalize the incremental commission cost at the amount actually paid or payable to obtain the specific contract; do not gross up or estimate beyond the actual incremental cost incurred. Subsequent measurement: amortize the capitalized asset on a systematic basis consistent with the transfer of the related goods/services to the customer (i.e. matching the project's revenue recognition pattern); test the asset for impairment if there is an indication the remaining amount is not recoverable (e.g. expected cancellation), and write off the unamortized balance net of enforceable clawbacks immediately on confirmed cancellation.

Present capitalized commissions as contract cost assets (an asset recognized from costs to obtain a contract with a customer), separate from inventory and other receivables; disclose the amortization method and period, and its link to the revenue recognition pattern (point in time vs over time) per project; disclose the amount of amortization recognized in the period and the amount of impairment/write-offs on cancelled contracts, net of clawbacks; disclose the accounting policy election of the one-year practical expedient if used for any population of contracts.

• Expensing all commissions immediately on payment regardless of contract duration, mismatching selling expense against revenue recognized years later for point-in-time, multi-year projects
• capitalizing commissions that are not genuinely incremental (e.g. a portion of a fixed salary or bonus pool not tied to a specific contract)
• keeping capitalized commission assets on the books for units whose contracts have been cancelled, instead of writing them off net of enforceable clawbacks
• applying a portfolio-average amortization approach that fails to align individual unit commission releases with each unit'
• s specific handover date
• inconsistently applying the one-year practical expedient across similar contract populations.