Ind AS 115 - Ind AS 115 requires companies

to
Revenue
from Contracts wvith allocate the transaction price to each
performance obligation based on its
Customers relative standalone selling price. This
approach ensures that revenue is
The Institute of Chartered
recognized in proportion to the value of
Accountants of India (lCA) issued Ind each performance obligation.
AS 115, and it aligns with the Companies nust recognize revenue
International Financial Reporting when they satisfy the performance
obligations in the contract by
Standard (IFRS) 15, Revenue from transferring control of the goods or
Contracts with Customers. The standard services to the custoner.
is applicable to all companies that
prepare their financial statements in The standard alsoprovides guidance
on how to accOunt for variable
accordance with the Ind AS.
Consideration, such as discOunts,
Ind AS 115 provides a rebates, and incentives, and how to
account for contract modifications.
comprehensive framework for
Companies must also disclose
recognizing revenue from contracts with
Customners. The standard requires information about the nature, amount,
timing, and uncertainty of revenue and
companies to recognize revenue when
control of the goods or services is cash flows arising from contracts with
transferred to the customer, rather than customers.
To summarize, Indian Accounting
when the risks and rewards are Standard (Ind AS) 115, Revenue from
transferred. This approach provides a Contracts wvith Customers, provides
more consistent and objective basis for quidance on how to recognize revenue
from contracts with customers. These
recognizing revenue and is expected to
guidelines are:
improve comparability across industries
and geographies. a. Identify the contract with the
customer. A contract is an agreement
between two or more parties that
The standard also provides guidance creates enforceable rights and
on howto identify the contract with the obligations.

customer and how to identify the b. Identify the performance obligations

in the contract. Performance obligations
performance obligations in the contract.
are promises to transfer goods or
Performance obligations are promises to services to the customer
transfer goods or services to the
C. Determine the transactton price. The
customer, and they can be explicit or transaction price is the amount of
implicit. Companies must determine the consideration that the company expects
transaction price, which is the amount of to receive in exchange for transferring
consideration that they expect to receive goods or services to the customer.
in exchange for transferring goods or d. Allocate the transaction price to the
services to the customer. performance obligations. The
transaction price must be allocated to
each performance obligation based on
A
contract is an agreement between
its relative standalone selling price.
twoor more parties thatcreates
e. Recognize revenue when the
enforceable rights and obligations. It performance obligations are satisfied:
may be written,oral, or implied by Revenue should be recognized when
control of the goods or services is
Customary business practice. transferred to the customer.
 5 step model
" ldentify the contract with customer
" ldentify individual performance obligation
" Determine the transaction price
" Allocate TP to PO
Recognize revenue as PO is satisfied

Step I:ldentify contract with

customer
Contract is agreement between 2 or more
and
parties creating enforceable rights
obligations
lt may be written or oral
S points for contract
Parties have approved and committed to perform
Each parties rights identified
Payment terms identified
Commercial substance
Probable collection of consideration

STEP 2 -IDENTIFY THE

PERFORMANCE OBLIGATIONS
" PO are promise in a contract with a
customer to transfer either
o Goods
o Service
o Series of the same
" Admin or seturp charges are not PO

STEP 3- DETERMINETHE
TRANSACTIONPRICE
" TP is consideration amount entity
expects to receive in exchange for
promise other than collected for third
party
STEP 4-ALLOCATE THE
TRANSACTION PRICE TO EACH
OBLIGATION
PERFGRMAne
Based on selling price or
each performance obligation
" If the stand-alone selling price(s) are not
observable, they are estimated.
Approaches to estimate may include:
(1) Adjusted market assessment approach
(ii) Expected cost plus a margin approach
(ii) Residual approach (restrictive)

STEP 5-RECOGNISE REVENUE

AS EACH PERFORMANCE
OBGATONSAD
recognised, either (i) Over time, or (ii) At
a point in time.
 AS-115) creates for whentime. or consideration
activities
obtain
exchange goods
of
customer
(nd that passage tO
ordinary
transfer entity
parties in
CUSTOMERS received
consideration
a the an entity's
to to
more thanperformance.
transferred with
obligation
has
or other contracted
WITH two entity the
customer.
to something of
obligations.)
between has
right entity's
the output
CONTKAGlS future
entity
's whichthehas conside
entity entity's an
agreenment on An fromthat
the are
presented. conditioned
separately and An that Liability: for
due)party
customer that
FROM rights Asset: the
DEFINITIONS
1. services
example, is A
services
An for
Customer:
amount
enforceable
>REVENUE
tContract:
Contract
is
Contract
a exchan
right to
or services or
goods For the goods
that (or in
 (Performance Obligatíon:1: A rIfn4 iT 3ontrat nth

distirnt, ot
()A series, f distinct gords or series that are sibstarntiaiy *;
$ame Snd that have the sarme pattern oftransíer to the custoner.
Stand-Alone Selling Price: The price at which an entity ws
se:ila itomised good or serviceseparateiy to a custoTner.
Transactíon Price for a Contract with a Customer: The arnouz
f cssdstation towhich an entity ezpects to be entitled in ezchana:
fr ranshstring pronised goods or services to a customer, exchudin
ámounts colletedon behalf of third parties.
2.OBJECTIVE
The obj9tive of thís Standard is to establísh the principles that a.
entity #hail apply to report useful information to users of financia
tsterIgnts about the nature, amount, timing and uncertainty o
TSVN) 3Td zagh flgWg arisingírom a contract with a customer.
3.8COPE
A entity shallapply this Standard to allcontracts with customers.
GeJA thefollowing:
(3) La#; (ont1acts withín the scope of Ind AS- 17 (Leases)
( jSnSAnG Contract within the scope of Ind AS- 104 (Insurance
(Contac134)
(:) inaD:ial instuInents and other contractual rightsor obligations
within ho cup8 of Ind AS- 109 (Financial Instruments), Ind AS
110(Consolidatgd FinanCial Statements), Ind AS -111(Joint
Arrongo11DL9), Ind AS- 27(SuparaloFunancial Statements) and Ind
A3- 28( Invstments 0nAsHociates and Joint Ventures)
(d) No-inGnetary oxchangesbetween entities in the same line of
biusing4s 1 facilitate wale# to customers or potential customers. PO
 <IttPresenta
21

exal1ple, this Standard would not apply to a

Contract between two oil
Companies that agree to an
customers in
exchange of oil to fulfill demand from
tieir different specified locations on a
4.RECOGNITION timely basis.
A. Identifyingthe Contract
(Anentity shall account for a contract with a customer that is within
ne of this Standard only when all of the
following criteria are
met:
ia) The parties to the contract have
approved the contract yin
onting. orally or in accordance with other customary
business
practices) and are committed to perform their
respective obligations.
(ib) The entity can identify each party's rights
regarding the goods
or services to be transferred.)
fc The entity can identify the payment terms for
the goods or
services to be transferred.
(a) The contract has commercial substance i.e., the risk,
timing or
amount of the entity's future cash flows is expected to change as a
result of the contract).
(e) It is probable that the entity will collect. the
which it will be entitled in exchange for the goods or
consideration to
services that
will be transferred to the customer. In
evaluating whether
coliectability of an amount of consideration is probable, an entity shall
Consider Only the customer's ability and intention to pay that amount
ofconsideration when it is due. The amount of
consideration to which
the entity will be entitled may be less than the price
stated in the
COtractif the consideration is variable because the entity may offer
the customer a price
concession.
B. Ldentifying Perfornance Obligations
A Contract inception, an entity shall assess the goods or
services
prOrnised in acontract with a customer and shall identify as a
perforrmance obligation each promise to transfer to the customer
either:)
a) A gOod or service (or a bundle of goods or services) that is
distinct, or
oA series of goods or services that are substantially the
distinct
garne and that have the same pattern of transfer to the customer.
 C. Satisfactionof Performance Obligations
An entity shall recognize revenue when (or as) the
entity
aperfornmance obligation by transterring a promised goord or."
(1.e an asset) to a customer. An asset is transferred when (or
customerobtains control of that asset.
5. Measurement
(When (or as) a performance obligation is satisfied, an entity sha
recognize as revenue the amount of the transaction price th
allocated to that performance obligation.
A. Determining the Transaction Price
An entity shall consider the terms of the contract and itscustormas
business practices to determine the transaction price The transactr.
price is the amount of considerationto which an entity expects to
entitled in exchange for transferring promised goods or services to
customer, excluding amounts collected on behalf of third parties (:
example, some sales taxes))The consideration promised in a contrar
with a customer may include fixed amounts, variable amounts, c:
both.)
B. Allocating the Transaction Price to Performance Obligations
The objective when allocating the transaction price is for an enti
to allocate the transaction price to each performance
obligation (c:
distinct good oI service) in an amount that depicts the amount c:
consideration to which the entity expects to be entitled in exchange
for transferring the promised goods or services to the
customer.)
6.Presentation
When either party to a contract has performed, an entity shall
present the contract in the balance sheet as a
contract asset or a
contract liability, depending on the relationship between the entity 's
performance and the customer's payment, An entity shall presernt
any unconditional rights to consideration
separately as a receivable.
7, Disclosure
(The objective of the disclosure reauirements is for an entity to
sclose suficient information toenable usersof financial statenents
tO understand the nature,amount timing anduncertainty Oveue
 Disclosure requirements under Ind AS
115 include:

1. Revenue: Disclose disaggregated

revenue from contracts with
customers, including information
about timing, nature,and uncertainty
of revenue and cash flows.
2. Contract balances: Disclose
information about receivables,
contract assets, and contract liabilities
arising from contracts with customers.
3. Performance obligations: Describe
when performance obligations are
satisfied,significant payment terms,
and details about variable
consideration.

4. Significant judgments: Disclose

judgments made in applying the
revenue recognition criteria, including
how the criteria are applied to
Contracts with customers.
5. Asset recognized from the costs to
obtain or fulfill a contract: Disclose
information about the amortization of
assets recognized from the costs to
obtain or fulfilla contract.