Ind AS-115 summary
Applicable from April, 2018)
Scope- Applicable to all the contracts with CUSTOMER, except the followings-
CONTRACT: – Agreement between 2 or more parties that creates enforceable rights and obligation.
STEP-1 IDENTIFYING CONTRACT
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
COMBINATION OF CONTRACT
CHECK WHETHER THESE 2 CONDITIONS ARE FULFILLED:-
STEP-2 PERFORMANCE OBLIGATION
PROMISE to transfer GOODS/SERVICES or SERIES of GOODS/SERVICES (same pattern of transfer to customer) that are DISTINCT
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).
CONSTRAINTS IN VARIABLE CONSIDERATION
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
NON- CASH CONSIDERATION
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
USE Residual approach only if
Key Point: – Allocate discount before applying RESIDUAL APPROACH
STEP-5 RECOGNIZING REVENUE WHEN PERFORMANCE OBLIGATION FULFILLED
As and when CONTROL is transferred.
TRANSFER OF CONTROL
KEY NOTE- For OPTIONS, above treatment only if Option is likely to be exercised.
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)
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.