건설사업과 경제적 실질 우선 원칙 : 시행사와 시공사 관계를 중심으로

초록

Substance-over-form principle is one of the key foundations in accounting which mandates firms to follow economic substance of transactions rather than legal form of those transactions when the two are inconsistent. Under the principle-based IFRS system where managerial discretion is widely allowed, the importance of substance-over-form principle is more emphasized. In this study, we analyze the economic substance of project financing-based development business and discusses related accounting issues, a model which becomes prevalent in the Korean construction industry. In a project financing business, developers and construction firms are distinct in their roles and responsibilities from a legal perspective; the role and responsibility of the former are broad in relation with overall business operation (e.g., designing a development project at the initial stage, financing, purchasing land for development, proceeding administrative procedures, contracting with a construction firm, and selling), while those of the latter are restricted only to construction. In reality, however, such distinction is often blurred due to various considerations (e.g., payment guarantee of construction firms against developers’ default cases). As a result, some construction firms are suspected to report their financial information simply based on a construction contract (i.e., legal form) without economic substance of the contract properly considered. Using an audit review case on construction firm A, we show it is likely that despite a construction contract (i.e., legal form) with a developer, the construction firm had actively managed the entire development project from an economic perspective (just as its own development project). Our argument is primarily based on the fact that the construction firm and the developer are in special relation (i.e., related parties) despite no explicit ownership between the two entities. Further, the construction firm provides payment guarantee against the developer’s potential default cases and is closely involved in various key decision-makings of the project. As such, if a developer is legally independent but under the de facto control of a construction firm, it is important to carefully review the following accounting issues. First of all, a construction firm should consider consolidating a developer in financial reporting. A construction firm needs to incorporate all circumstances and facts beyond a simple equity relationship in deciding whether to possess controlling power over a developer. Second, two disclosure issues may follow when a developer is not consolidated as a result of the first consideration. Since a construction firm generally provides credit enhancing services to a developer (e.g., payment guarantee) in a project financing-based business model, contingent liabilities may be required to be recognized. In addition, if those in a keen relation with the owner of a construction firm (e.g., relatives, executives, and employees) work for a developer, they may fall under related parties by the relevant accounting standards. Hence, contingent liabilities, related party transactions, or both, if any, should be properly disclosed in the footnote. Third, another consideration, when a developer is not consolidated, is impairment that can occur as a developer’ business risk is passed on to a construction firm. The direct subject bearing such business risk is a developer who manages overall business operation, but if the project goes unsuccessful, receivables of a construction firm may not be fully collectable. Therefore, when evaluating receivables, the probability of a developer’s default needs to be taken into account so that construction firm’s profits and equity are not overstated. Finally, from interviews with industry experts, this study illustrates distinct characteristics of a developer run by a construction firm which are summarized as follows: i) special relationship between a developer and a construction firm, ii) construction firm’s strong control over a developer (e.g., keeping a developer’s corporate seal within a construction firm), iii) direct cash management and payment by a construction firm during a project, iv) compensation for a developer’s executives and employees by a construction firm, v) active management of a project by a construction firm, vi) construction firm’s (implicit) permission for a concurrent job position at a developer, vii) exclusive contracting with a developer and a construction firm, viii) (almost) no physical entity of a developer, and ix) selective ownership transfer of successful projects from a developer to a construction firm. This study expectedly functions not only as educational material for learners but practical guidance on accounting treatments (auditing) for construction firms (auditors) and provides useful policy implications for regulators to improve accounting practices in the construction industry.

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