2009

ACCOUTNING
STANDARD - 09
EDU-09-AD-14.09.09
A brief discussion of accounting standard 9 issued by THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF INDIA.

Education division
www.angelesia.com
9/14/2009
AN INTERPRETATION TO ACCOUNTING STANDARD
09
REVENUE RECOGNITION (EDU-09-AD-14.09.09)

Introduction
This standard is introduced to clear the ambiguity about the recognition of revenue. This
standard clears the doubt of, How much revenue to be recognized?, When to be recognized?,
Which revenue to be recognized?, etc.
In general, revenue can be generated in the following ordinary activities
- Sale of Goods,
- Rendering of Services,
- Use by others of enterprise resources yielding Interest, Royalties & Dividends.

Exceptions
This standard does not deals with the following activities
- Revenue from Construction contracts,
- Revenue from Hire-Purchase, Lease agreements,
- Revenue from Govt. Grants, Subsidies,
- Revenue of Insurance companies.

Definitions
Revenue means
(1) Charges made to customer & clients for sale of goods, rendering services, or for using
enterprise’s resources.
(2) Gross inflow of cash, receivables and other consideration arising in the ordinary course of
business.
(3) In case Agency Relationship, Revenue means the commission and not the gross cash in
flow, receivable or other considerations.
Completed service contract method
- Revenue is recognized only when the services are completely or substantially completed.
Proportionate completion method
- Here revenue is recognized with degree of completion.
Revenue does not include
- Realized or unrealized capital profit or loss on disposal of Fixed Assets,
- Unrealized gains on changing in value of some current assets,
- Gains resulting from changes in foreign exchange rates
- Realized gain resulting from the discharge of an obligation or liability at less than its
carrying amount,
- Unrealized gain on restatement of carrying amount of an obligation or liability.

Sale of Goods
- The seller has to transfer the property in the goods, or
- The seller has to transfer all risk & reward of ownership
 - For some consideration or price, and
- The seller retains no significant control on such goods, and
- No significant uncertainties exist on amount of consideration,

Rendering of services
Here performance is measured under
- Completed service method (Defined above)
 Performance consists of the execution of single act,
 Performance consists execution of more than single act and accordingly performed all
the acts or substantial acts
- Proportionate Completion method (Defined above)
 Performance consists execution of more than single act and accordingly revenue is
recognized proportionately by reference to the performance of each act or number of
acts.

Other Revenues
Interest - On time basis, with an applicable rate, on amount outstanding,

Royalties - On accrual basis, in accordance with agreement,

Dividends - When the owner’s right to receive payment is established,

Disclosure
Disclosure should be made about the circumstances in which revenue recognition has been
postponed.