Page 214 - Arvind 2024
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Key audit matters
How our audit addressed the key audit matter
Revenue from contracts with customer (Refer Note 2.3 of the consolidated financial statements
In accordance with the requirements of Ind AS 115, Group’s revenue from real estate projects is recognized
at a point in time, which is upon the Group satisfying its performance obligation and the customer obtaining control of the promised asset.
Application of Ind AS 115 requires significant
judgment in determining when ‘control’ of the property underlying the performance obligation is transferred to the customer and in assessment of whether the
contracts with customers involved any financing element.
As the revenue recognition involves significant judgement, we regard this as a key audit matter.
We performed cut off procedures for determination of revenue in appropriate reporting period.
We assessed the disclosures made in accordance with the requirements of Ind AS 115.
Assessing the carrying value of Inventory (Refer Note 2.3 of the consolidated financial statements)
Our audit procedures included, among others, the following:
We obtained and understood management process and controls around transfer of control in case of real estate projects and tested the relevant controls over revenue recognition at a point in time.
We assessed the management evaluation of whether the contracts with customers involved any financing element, taking in to account the consideration received in accordance with the terms of the contract.
We performed test of details, on a sample basis, and inspected the underlying customer contracts, sale deed documents, evidencing the satisfaction of performance obligation and the transfer of control of the property based on which revenue is recognized at a point in time.
As at March 31, 2024, the carrying value of the inventory of ongoing and completed real estate projects is Rs.136,195.91 Lac. The inventories are held at the lower of the cost and net realizable value.
Our audit procedures included, among others, the following:
Obtained an understanding of the management process for determination of the Net realizable value (NRV) including estimating the future costs to complete for stock of ongoing projects.
We identified the assessment of whether carrying value of inventory were stated at the lower of cost and net realizable value (“NRV”) as a key audit matter due to the significance of the balance to the consolidated financial statements as a whole. The determination of
the NRV involves estimates based on prevailing market conditions and taking into account the estimated future selling price, cost to complete projects and selling
costs.
Obtained, read and assessed the management’s process in estimating the future costs to complete stock of ongoing projects.
Assessed the methods used by the management, in determining the NRV of ongoing and completed real estate projects and tested the underlying assumptions used by the management in arriving at those projections.
Performed sensitivity analysis on these key assumptions to assess any potential downside.
- For sample of selected projects:
Compared the forecasted costs to complete the project to the construction costs of other similar projects
Compared the NRV to recent sales in the project or to the estimated selling price.
Compared the carrying value to the NRV.
212 | Arvind SmartSpaces Limited
