Ind AS-115 summary

Applicable from April, 2018)

Scope- Applicable to all the contracts with CUSTOMER, except the followings-

Applicable to all the contracts with CUSTOMER

CONTRACT:Agreement between 2 or more parties that creates enforceable rights and obligation.

Oral Contract

Step Model

STEP-1 IDENTIFYING CONTRACT

Again 5 Key Steps- all should be satisfied

Again 5 Key Steps- all should be satisfied

Key point- If step-1 not fulfilled and entity receive consideration from customer

Recognize the REVENUE only if following 2 conditions are met

2 conditions are met

COMBINATION OF CONTRACT

Combination Of Contract

CHECK WHETHER THESE 2 CONDITIONS ARE FULFILLED:-

Check Whether These 2 Conditions

 

STEP-2 PERFORMANCE OBLIGATION

PROMISE to transfer GOODS/SERVICES or SERIES of GOODS/SERVICES (same pattern of transfer to customer) that are DISTINCT

Step-2 Performance Obligation

Discount Coupon-Gift And Revenue Recognition

Non-Refundable Upfront Fee

Non-Refundable Upfront Fee

STEP-3 TRANSACTION PRICE

Consideration which an entity expects to be entitled for discharging performance obligation (excluding amount collected on behalf of 3rd party).

Consideration

CONSTRAINTS IN VARIABLE CONSIDERATION

Significant reversal in already recognized revenue

Significant reversal in already recognized revenue

SIGNIFICANT FINANCING COMPONENT

If the time GAP between performance obligation & payment (advance or after delivery) is SIGNIFICANT (>12 months). It will be treated as hidden loan

ajustments

NON- CASH CONSIDERATION

Non- Cash Consideration

CONSIDERTAION PAYABLE TO CUSTOMER

Considertaion Payable To Customer

STEP-4 ALLOCATION OF TRANSACTION PRICE TO PERFORMANCE OBLIGATION

(Para 73)- Fairly depict consideration from each performance obligation on a relative standalone selling price basis except for allocating

Fairly depict consideration

Standalone Selling Price

USE Residual approach only if

USE Residual approach only if

Key Point: – Allocate discount before applying RESIDUAL APPROACH

Allocation

STEP-5 RECOGNIZING REVENUE WHEN PERFORMANCE OBLIGATION FULFILLED

As and when CONTROL is transferred.

control

TRANSFER OF CONTROL

Transfer Of Control

Method OF Measuring Progress OF Performance Obligation

Sale & Repurchase (Repo Arrangement) (Forward Options)

KEY NOTE- For OPTIONS, above treatment only if Option is likely to be exercised.

Contract Cost

SERVICE CONCESSION ARRANGEMENTS

(Not a property plant and equipment)

(Ex- infra for public service such as Roads, Bridge, Tunnels etc.)

(also known as Build-operate-transfer, rehabilitate-operate-transfer, or public to private service concession agreement)

Service Concession Arrangements

Key Point- If Operator performs >1 service such as Construction or upgradation and operation service) under a SINGLE contract, Consideration must be allocated to relative fair values of service delivered.

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Qualification: CA in Job / Business
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Member Since: 24 Apr 2020 | Total Posts: 4

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