Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants. The Standard shall be applied in accounting for revenue arising from the following transactions and events: (a) the sale of goods; (b) the rendering of services; and (c) the use by others of entity assets yielding interest and royalties The Standard deals with recognition of interest. However, measurement of interest and recognition and measurement of dividend are dealt in accordance with Ind AS 109, Financial Instruments. The impairment of any contractual right to receive cash or another financial asset arising from this Standard shall be dealt in accordance with Ind AS 109, Financial Instruments.
List of other IndAS
Identification of the transaction
The recognition criteria in this Standard are usually applied separately to each transaction. However, in certain circumstances, it is necessary to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction. For example, when the selling price of a product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as revenue over the period during which the service is performed. Conversely, the recognition criteria are applied to two or more transactions together when they are linked in such a way that the commercial effect cannot be understood without reference to the series of transactions as a whole. For example, an entity may sell goods and, at the same time, enter into a separate agreement to repurchase the goods at a later date, thus negating the substantive effect of the transaction; in such a case, the two transactions are dealt with together.
Measurement of revenue
Revenue shall be measured at the fair value of the consideration received or receivable. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The amount of revenue arising on a transaction is usually determined by agreement between the entity and the. buyer or user of the asset. It is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the entity.
Sale of goods
Revenue from the sale of goods shall be recognised when all the follo wing conditions have been satisfied:
(a) the entity has transferred to the buyer the significant risks and rewards of ownership of the goods;(b) the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue can be measured reliably;(d) it is probable that the economic benefits associated with the transaction will flow to the entity; and (e) the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the economic benefits associated with the transaction will flow to the entity; (c) the stage of completion of the transaction at the end of the reporting period can be measured reliably, and (d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. The recognition of revenue by reference to the stage of completion of a transaction is often referred to as the percentage of completion method. Under this method, revenue is recognised in the accounting periods in which the services are rendered. The recognition of revenue on this basis provides useful information on the extent of service activity and performance during a period. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that
Interest and Royalties
Revenue arising from the use by others of entity assets yielding interest and royalties shall be recognised when: (a) it is probable that the economic benefits associated with the transaction will flow to the entity; and (b) the amount of the revenue can be measured reliably. Revenue shall be recognised on the following bases: (a) interest shall be recognised using the effective interest method as set out in Ind AS 109; (b) royalties shall be recognised on an accrual basis in accordance with the substance of the relevant agreement.
Difference Between AS 9 and Ind AS 18
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completed service contract method or percentage completion method.
to provide goods or services, for free or at discounted prices or to provide award credits to its customers due to any customer loyalty programme.
Gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from:
the sale of goods, or from the rendering of services, or from the use by others, of the resources of the enterprise resources, yielding interest, royalties and dividends.
As per Ind AS 18, Revenue means: economic benefits that arise in the ordinary course of activities of an entity which result in increases in equity, other than increases relating to contributions from equity participants.
Ind AS 40 Investment PropertyIND AS 36 Impairment of AssetsIndAS 1 Presentation of Financial StatementIndAS 7 Statement of Cash FlowsIndAS 8 Accounting PoliciesCA Final RTPCA Final Mock Test PapersPan Card Status
