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FR Revision Capsule Part II by ICAI
FR Revision Capsule Part II by ICAI
Final new course Paper 1- Financial Reporting: A Capsule for Quick Revision
In a pursuit to provide quality academic inputs to the students to help them in grasping the intricate aspects of the subject,
the Board of Studies brings forth a crisp and concise capsule on Final new course Paper 1 : Financial Reporting.
The syllabus of this paper largely covers almost all Indian Accounting Standards. However, in this capsule we have
focussed on ‘Ind AS covered in Module 2 of November, 2018 edition of the study material except Ind AS 20, Ind AS 113 and
Ind AS 101’. Significant provisions of these Ind AS have been presented through pictorial/tabular presentations for better
understanding and quick revision.
Many of the standards contain certain exceptions. All the exceptions are not necessarily reflected in the charts/
pictorial/table given in the capsule. Hence, students are advised to refer the study material or bare text of these Ind AS
for comprehensive study and revision. Under no circumstances, this capsule substitute the detailed study of the material
provided by the Board of Studies.
Further, students are advised to enhance their ability to address the issues and solve the problems based on Ind AS by
working out the examples, illustrations and questions given in the study material, revision test papers and mock test papers.
Objective
With the entity’s financial With the financial statements For the presentation
of financial For their
statements of previous of other entities. structure For their content
periods. statements
Scope
Applicability Non-applicability
Ind AS 1 is applied in preparing and Ind AS 1 does not apply to the structure
presenting general purpose financial and content of condensed interim financial
statements in accordance with Ind AS statements prepared in accordance
with Ind AS 34 (except paras 15-35).
To all entities
Ind AS 1 uses terminology Entities whose share capital is
suitable for profit-oriented not equity may need to adapt the
entities including public financial statement presentation
sector business entities. of members’ interests.
Presenting Presenting
consolidated separate financial
financial statements in
statements in accordance with
accordance with Therefore, entities with not-
Ind AS 27. for-profit activities may apply
Ind AS 110.
this Standard, by amending
the descriptions used for
financial statements themselves
includes
Note:
1. An entity shall present a single statement of profit and loss, with profit or loss and other comprehensive income (OCI)
presented in two sections. The sections shall be presented together, with the profit or loss section presented first followed
directly by the other comprehensive income section.
2. Reports and statements presented outside financial statements are outside the scope of Ind AS.
3. An entity is not required to present the related notes to the opening balance sheet as at the beginning of the preceding period.
General features
Consistency of Comparative
presentation information
Presentation of True and Fair View and compliance with Ind ASs
Of the financial position Of the financial performance Of the cash flows of an entity
Management’s conclusion Management’s compliance • The title of the Ind AS For each period presented,
that the financial with applicable Ind ASs, departed the financial effect of the
statements present a true except departure from a • The nature of the departure on each item in
and fair view. particular requirement to departure the financial statements.
present a true and fair view. • The treatment that the
Ind AS would require
• The reason why that
treatment would be so
misleading; and
• The treatment adopted.
Note:
1. An entity shall make an explicit and unreserved statement of compliance of ALL Ind AS in the notes.
2. An entity shall not describe financial statements as complying with Ind ASs unless they comply with all the requirements of Ind ASs.
3. An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or
explanatory material.
Going m An entity shall prepare financial statements Change in When an entity reclassifies comparative amounts,
concern on a going concern basis unless management accounting it shall disclose (including as at the beginning of
intends to liquidate the entity or policy, the preceding period):
to cease trading, or retrospective (a) the nature of the reclassification;
has no realistic alternative but to do so. restatement or (b) the amount of each item or class of items that
m When management has significant doubt reclassification is reclassified; and
upon the entity’s ability to continue as a (c) the reason for the reclassification.
going concern, the entity shall disclose When it is impracticable to reclassify comparative
the basis on which it prepared the amounts, an entity shall disclose:
financial statements and (a) the reason for not reclassifying the amounts,
the reason why the entity is not regarded and
as a going concern. (b) the nature of the adjustments that would
To assess going concern basis, management may have been made if the amounts had been
need to consider a wide range of factors like reclassified.
m current and expected profitability, Consistency An entity shall retain the presentation and
m debt repayment schedules and of classification of items in the financial statements
m potential sources of replacement financing. presentation from one period to the next unless:
Accrual basis m An entity shall prepare its financial (a) presentation or classification would be more
of accounting statements, except for cash flow information, appropriate having regard to the criteria for
using the accrual basis of accounting. the selection and application of accounting
m When the accrual basis of accounting is policies in Ind AS 8; or
used, an entity recognises items as assets, (b) an Ind AS requires a change in presentation.
liabilities, equity, income and expenses.
Materiality m Present separately each material class of STRUCTURE AND CONTENT
and similar items.
Identification An entity shall clearly identify each financial
aggregation m Present separately items of a dissimilar
of the financial statement and the notes.
nature or function only if it is material or
statements
required by law (even if it is immaterial). It shall display prominently:
m If a line item is not individually material, it is (a) the name of the reporting entity or other
aggregated with other items either in those means of identification, and any change
statements or in the notes.
m Do not reduce the understandability of its in that information from the end of the
financial statements by preceding reporting period;
obscuring material information with (b) whether the financial statements are of an
immaterial information; or individual entity or a group of entities;
aggregating material items that have
different natures or functions.
(c) the date of the end of the reporting
period or the period covered by the set of
Offsetting Offsetting of assets and liabilities or income and
expenses is not allowed unless required or permitted financial statements or notes;
by an Ind AS or except when offsetting reflects the (d) the presentation currency; and
substance of the transaction or other event. (e) the level of rounding used in presenting
Frequency of An entity shall present a complete set of financial amounts in the financial statements.
reporting statements (including comparative information) The rounding off is acceptable as long as
at least annually.
the entity discloses it and does not omit
Comparative Refer chart 3 of Ind AS 1 for minimum and
material information.
information additional comparative information.
08 May 2019 The Chartered Accountant Student
FINANCIAL REPORTING
Information to m The balance sheet shall present line items m Where there is a breach of a material
be presented and additional line items (including by provision of a long-term loan arrangement
in the balance disaggregating the line items listed in on or before the end of the reporting period
sheet paragraph 54), headings and subtotals. with the effect that the liability becomes
m Presents current and non-current assets, payable on demand on the reporting date,
and current and non-current liabilities, as the entity does not classify the liability
separate classifications in its balance sheet. as current, if the lender agreed, after the
m It shall not classify deferred tax assets reporting period and before the approval
(liabilities) as current assets (liabilities). of the financial statements for issue, not to
demand payment as a consequence of the
breach.
Exception
An entity may present all assets and liabilities in Information Disclose sub-classifications of the line items
order of liquidity but shall disclose the amount to be presented, classified in a manner appropriate to
expected to be recovered or settled presented the entity’s operations.
(a) no more than twelve months after the either in the
reporting period, and balance sheet
(b) more than twelve months after the reporting or in the
period. notes
m An entity is permitted to present some of Statement m The statement of profit and loss shall
its assets and liabilities using a current/non- of Profit and present, in addition to the profit or loss and
current classification and others in order of Loss other comprehensive income sections:
liquidity when this provides information that (a) profit or loss;
is reliable and more relevant. (b) total other comprehensive income;
Current m Classify an asset as current when: (c) comprehensive income for the period,
assets (a) it expects to realise the asset, or intends to being the total of profit or loss and other
sell or consume it, in its normal operating comprehensive income.
cycle; m An entity shall not present any items of
(b) it holds the asset primarily for the income or expense as extraordinary items.
purpose of trading; m An entity shall present an analysis of
(c) it expects to realise the asset within expenses recognised in profit or loss using
twelve months after the reporting period; a classification based on the nature of
or expense method.
(d) the asset is cash or a cash equivalent m An entity shall present additional line items,
unless the asset is restricted from being headings and subtotals in the statement of
exchanged or used to settle a liability for profit and loss, when such presentation is
at least twelve months after the reporting relevant to an understanding of the entity’s
period.
financial performance.
m Classify all other assets as non-current.
Note: The term ‘non-current’ includes tangible, Information to m Present line items for the amounts for the
intangible and financial assets of a long-term be presented period of:
nature. in the other (a) items of OCI classified by nature and
Operating m It is the time between the acquisition of comprehensive grouped into those that:
cycle assets for processing and their realisation in income (OCI) (i) will not be reclassified subsequently
cash or cash equivalents. section to profit or loss; and
m When the entity’s normal operating cycle is (ii) will be reclassified subsequently
not clearly identifiable, it is assumed to be to profit or loss when specific
twelve months. conditions are met.
m The same normal operating cycle applies to (b) the share of OCI of associates and joint
the classification of an entity’s assets and ventures accounted for using the equity
liabilities. method, separated into the share of
items that:
Current m An entity shall classify a liability as current (i) will not be reclassified subsequently
liabilities when: to profit or loss; and
(a) it expects to settle the liability in its (ii) will be reclassified subsequently
normal operating cycle; to profit or loss when specific
(b) it holds the liability primarily for the conditions are met.
purpose of trading; m Disclose the amount of income tax relating to
(c) the liability is due to be settled within each item of OCI, including reclassification
twelve months after the reporting period; adjustments, either in the statement of profit
or and loss or in the notes.
(d) it does not have an unconditional right to m Present items of OCI either
defer settlement of the liability for at least (a) net of related tax effects, or
twelve months after the reporting period. (b) before related tax effects with one
m An entity shall classify all other liabilities as amount shown for the aggregate amount
non-current. of income tax relating to those items.
m An entity classifies some operating items m If an entity elects alternative (b), it shall
like trade payables and some accruals for allocate the tax between the items that
employee and other operating costs (part might be reclassified subsequently to the
of the working capital) as current liabilities profit or loss section and those that will not
even if they are due to be settled more than be reclassified subsequently to the profit or
twelve months after the reporting period. loss section.
gains and losses arising from translating the financial statements of a foreign
comprehensive income (OCI)
gains and losses from investments in equity instruments designated at fair value through OCI
Components of other
gains and losses on financial assets measured at fair value through OCI
the effective portion of gains and losses on hedging instruments in a cash flow hedge and the gains and losses
on hedging instruments that hedge investments in equity instruments measured at fair value through OCI
for particular liabilities designated as at FVTPL, the amount of the change in fair value that is attributable to changes in the
liability’s credit risk
changes in the value of the time value of options when separating the intrinsic value and time value of
an option contract and designating as the hedging instrument only the changes in the intrinsic value
changes in the value of the forward elements of forward contracts when separating the forward element
and spot element of a forward contract and designating as the hedging instrument only the changes in
the spot element, and changes in the value of the foreign currency basis spread of a financial instrument
when excluding it from the designation of that financial instrument as the hedging instrument
Its form and content shall conform to the It shall include, at a minimum, Entity shall present basic and
requirements of Ind AS 1 for a complete m Each of the headings and subtotals that diluted earnings per share for
set of financial statements. were included in its most recent annual that period.
financial statements.
m The selected explanatory notes as required
by this Standard.
m Additional line items or notes to avoid any
misleading of report.
An explanation of events and transactions that are significant Insignificant updates to the information that was reported in
to an understanding of the changes in financial position and the notes in the most recent annual financial report because
performance of the entity since the end of the last annual the user will have access to the most recent annual financial
reporting period. report carrying such information.
List of events and transactions for which disclosures would be required if they are significant:
(a) the write-down of inventories to net realisable value and the reversal of such a write-down;
(b) recognition of a loss from the impairment of financial assets, property, plant and equipment, intangible assets, or other assets,
and the reversal of such an impairment loss;
(c) the reversal of any provisions for the costs of restructuring;
(d) acquisitions and disposals of items of property, plant and equipment;
(e) commitments for the purchase of property, plant and equipment;
(f ) litigation settlements;
(g) corrections of prior period errors;
(h) changes in the business or economic circumstances that affect the fair value of the entity’s financial assets and financial liabilities,
whether those assets or liabilities are recognised at fair value or amortised cost;
(i) any loan default or breach of a loan agreement that has not been remedied on or before the end of the reporting period;
(j) related party transactions;
(k) transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments;
(l) changes in the classification of financial assets as a result of a change in the purpose or use of those assets; and
(m) changes in contingent liabilities or contingent assets.
Note: The list is not exhaustive.
Other Disclosures
Either Or
In the interim financial statements Incorporated by cross-reference from the interim financial statements to some other
statement (such as management commentary or risk report)
Statements should be available to users of the financial statements on the same terms as the interim financial statements and at
the same time otherwise the interim financial statements shall be considered as incomplete.
Interim reports shall include interim financial statements (condensed or complete) i.e.
m as of the end of the m for the current interim period. m cumulatively for the m cumulatively for the
current interim m cumulatively for the current current financial year to current financial year to
period. financial year to date. date. date.
m a comparative balance m comparative statements m comparative statement m a comparative statement
sheet as of the end of profit and loss for the for the comparable year- for the comparable year-
of the immediately comparable interim periods to-date period of the to-date period of the
preceding financial (current and year-to-date) of immediately preceding immediately preceding
year. the immediately preceding financial year. financial year.
financial year.
Note: For an entity whose business is highly seasonal, financial information for the twelve months up to the end of the interim period and
comparative information for the prior twelve-month period may be useful.
Points to remember
Disclosure of If an entity’s interim financial report is in compliance with this Standard, that fact shall be disclosed.
compliance
with Ind AS An interim financial report shall be described as complying with Ind ASs when it complies with all of the requirements of
Ind ASs.
Materiality In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality
shall be assessed in relation to the interim period financial data.
It shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual
financial data.
Disclosure If an estimate of an amount reported in an interim period is changed significantly during the final interim period of the
in annual financial year but a separate financial report is not published for that final interim period, the nature and amount of that
financial change in estimate shall be disclosed in a note to the annual financial statements for that financial year.
statements
An entity is not required to include additional interim period financial information in its annual financial statements.
Same accounting m Apply the same accounting policies in its interim financial statements as are applied in its annual financial
policies as annual statements, except for accounting policy changes made after the date of the most recent annual financial
statements that are to be reflected in the next annual financial statements.
m Measurements for interim reporting purposes shall be made on a year-to-date basis.
m The amounts reported in prior interim periods are not retrospectively adjusted. However, that the nature and
amount of any significant changes in estimates be disclosed.
Revenues received m Such revenues shall not be anticipated or deferred as of an interim date if anticipation or deferral would not be
seasonally, appropriate at the end of the entity’s financial year.
cyclically, or
occasionally m Some entities consistently earn more revenues in certain interim periods of a financial year than in other interim
periods. Such revenues are recognised when they occur.
Costs incurred Such costs shall be anticipated or deferred for interim reporting purposes if, and only if, it is also appropriate to
unevenly during anticipate or defer that type of cost at the end of the financial year.
the financial year
Use of estimates Preparation of interim financial reports generally will require a greater use of estimation methods than annual
financial reports.
Restatement A change in accounting policy, shall be reflected:
of previously (a) by retrospective application, with restatement of prior period financial data as far back as is practicable; or
reported interim
(b) if the cumulative amount of the adjustment relating to prior financial years is impracticable to determine,
periods
then under Ind AS 8 the new policy is applied prospectively from the earliest date practicable.
Interim Financial An entity shall not reverse an impairment loss recognised in a previous interim period in respect of goodwill.
Reporting and
Impairment
Objectives of Ind AS 7
To assess To require
the ability of the entity to the needs of the entity to the timing and certainty the provision of information about
generate cash and cash utilise those cash flows. of generation of cash the historical changes in cash and
equivalents. flows. cash equivalents of an entity.
Operating activities Investing activities Financing activities Cash and cash equivalents
These are the Investing activities Financing activities Cash Cash equivalents
principal revenue- are the acquisition are activities that
producing activities and disposal result in changes
of the entity other of long-term in the size and It Are short-
than investing or assets and other composition of the comprises term, highly
financing activities investments not contributed equity cash on liquid
included in cash and borrowings of hand & investments
equivalents the entity demand
deposits Are readily
Reporting convertible
An entity shall report separately to known
major classes of gross cash amounts of
receipts and gross cash payments cash
arising from investing and
Under direct Under indirect financing activities
method method Are subject
to an
insignificant
risk of
Whereby major Whereby profit or loss is adjusted for changes in
classes of gross • non-cash transactions value
cash receipts • any deferrals or accruals of past
and gross cash or future operating cash receipts
payments are or payments Are not for
disclosed • items of income or expense investment
associated with investing or purposes
financing cash flows
has a short
maturity of,
Exception say, 3 months
or less from
Entities are encouraged to follow the direct method. The Equity investments are excluded the date of
direct method provides information which may be useful from cash equivalents acquisition
in estimating future cash flows and which is not available
under the indirect method.
Note:
1. Cash flows denominated in a foreign currency are reported in a manner consistent with Ind AS 21.
2. A weighted average exchange rate for a period may be used for recording foreign currency transactions or the translation of the cash
flows of a foreign subsidiary.
3. Ind AS 21 does not permit use of the exchange rate at the end of the reporting period when translating the cash flows of a foreign
subsidiary.
Important Points
1. Unrealised gains and losses arising from are not cash flows.
changes in foreign currency exchange rates
2. The effect of exchange rate changes on is reported in the statement of cash flows in order to reconcile cash and cash
cash and cash equivalents held or due in a equivalents at the beginning and the end of the period.
foreign currency is presented separately from cash flows from operating, investing and
financing activities and includes the differences, if any, had those cash flows
been reported at end of period exchange rates.
Shall be
separately Investments W h e n an investor restricts its reporting
disclosed Tax cash in accounted in the statement of cash flows
When it is flow is
Cash practicable subsidiaries, for by use of to the cash flows between itself
classified associates the equity or and the investee, for example, to
flows to identify as an
arising and joint cost method dividends and advances.
investing or ventures
from financing
taxes on When it is Shall be classified W h e n Includes in its statement of cash
impracticable as cash flows from activity as reporting its flows:
income appropriate
to identify operating activities interest in • the cash flows in respect of its
when impracticable an associate investments in the associate
to identify with or a joint or joint venture, and
financing and venture using • distributions and other
investing activities the equity payments or receipts between
Note: When tax cash flows are allocated over more than one class of method it and the associate or joint
activity, the total amount of taxes paid is disclosed. venture.
Cash flows from interest and dividends received and paid shall
each be disclosed separately
Interest paid Interest and dividends Dividends paid Dividends Interest paid Interest and dividends
received paid received
Shall be classified as Shall be presented Shall disclose, in aggregate, during the period
investing activities separately
The total consideration The portion of the The amount of cash and cash The amount of the assets and
paid or received consideration consisting of equivalents in the subsidiaries liabilities other than cash or cash
cash and cash equivalents or other businesses over which equivalents in the subsidiaries
control is obtained or lost or other businesses over which
control is obtained or lost,
Cash flows arising from changes in ownership interests in a summarised by each major
subsidiary that do not result in a loss of control. category
Is to prescribe
The criteria for selecting and changing accounting policies The accounting treatment and disclosure of
Important Definitions
1. Accounting Specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial
policies statements.
2. A change in m It is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic
accounting consumption of an asset.
estimate m Change in accounting estimates result from new information or new developments.
m It is not corrections of errors.
m Effect of such a change is given prospectively.
3. Prior period m They are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods
errors arising from a failure to use, or misuse of, reliable information
m Such errors include the effects of
mathematical mistakes,
mistakes in applying accounting policies,
oversights or misinterpretations of facts, and
fraud.
4. Retrospective It is applying a new accounting policy to transactions, other events and conditions as if that policy had always been
application applied unless it is impracticable to do so.
5. Retrospective It is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a
restatement prior period error had never occurred.
Accounting Policies
Selection and application of accounting policies Changes in accounting policies (Refer Note 3)
When an Ind AS specifically When no Ind AS specifically If the change is If the change results providing reliable and
applies to a transaction, applies to a transaction, required by an more relevant information about the effects
other event or condition other event or condition Ind AS of transactions, other events or conditions
on the entity’s financial position, financial
performance or cash flows
The accounting policy(s) Management shall use its
applied to the item shall judgement in developing
be determined as per that and applying an accounting When an entity changes an accounting policy voluntarily, it
Ind AS policy (Refer Note 1) shall apply the change retrospectively, if specific transitional
provisions does not apply to that change. (Refer Note 4)
Exception
When it is impracticable to determine the period-specific effects of changing an accounting policy on comparative information for
one or more prior periods presented,
m apply the new accounting policy to the carrying amounts of assets and liabilities as at the beginning of the earliest period for
which retrospective application is practicable.
If it is impracticable to determine the cumulative effect, at the beginning of the current period, of applying a new accounting
policy to all prior periods,
m adjust the comparative information to apply the new accounting policy prospectively from the earliest date practicable.
Indian Accounting Standard (Ind AS) 10 : Events after the Reporting Period
Objective
Ind AS 10 prescribes
Carve Out: Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting
period with the effect that the liability becomes payable on demand on the reporting date, the agreement by lender before the
approval of the financial statements for issue, to not demand payment as a consequence of the breach, shall be considered as an
adjusting event.
Adjusting events after the reporting period Non-adjusting events after the reporting period
Consider if the contract meets each of the five criteria to pass Step 1: Continue to assess the contract to
determine if the Step 1 criteria are met.
Have the parties approved the contract? (approval may be written, oral, or implied, as
long as the parties intend to be bound by the terms and conditions of the contract)
No Recognise consideration received
Yes
as a liability until each of the five
Can the entity identify each party's rights regarding the goods/services to be transferred? criteria in Step 1 are met or one of
No
Yes the following occurs:
Can the entity identify the payment terms for the goods/services to be transferred? 1. entity has no remaining
No performance obligations and
Yes
substantially all consideration
Does the contract have commercial substance? has been received and is non-
No
Yes refundable.
Is it probable that the entity will collect substantially all of the consideration to which it will 2. contract is terminated
be entitled in exchange for the goods/services that will be transferred to the customer? and consideration is non-
No
Yes refundable.
Proceed to Step 2 and only reassess the Step 1 criteria if there is an
indication of a significant change in facts and circumstances.
Notes:
1. If at the inception of an arrangement, an entity concludes that the criteria below are not met, it should not apply Steps 2 through 5
of the model until it determines that the Step 1 criteria are subsequently met.
2. When a contract meets the five criteria and ‘passes’ Step 1, the entity will not reassess the Step 1 criteria unless there is an
indication of a significant change in facts and circumstances.
3. Two or more contracts may need to be accounted for as a single contract if they are entered into at or near the same time with the
same customer (or with related parties), and if one of the following conditions exists:
(a) The contracts are negotiated as a package with a single commercial objective;
(b) The amount of consideration paid in one contract depends on the price or performance in the other contract; or
(c) The goods or services promised in the contract are a single performance obligation.
Combining contracts
An entity is required to combine two or more contracts and account for them as a single contract if they are entered into at or near the same
time and meet any one of the following criteria:
Yes
Are the contracts negotiated as a package with a single commercial objective?
No
Whether goods or services promised in the contract are a single performance Yes
obligation?
No
Are both of the following true: Yes Account for the modification as a separate
m The scope of the contract increases because distinct promised contract.
goods or services are added to the contract.
m The consideration increases by the stand-alone selling price of the
added goods or services. Allocate the remaining transaction price
not yet recognised to the outstanding
No performance obligations. In other words,
Yes treat as a termination of the old contract
Are the remaining goods or services distinct from the goods or services and the creation of a new contract.
transferred on or before the date of the contract modification?
No
Account for the contract modification as
Are the remaining goods or services not distinct and, therefore, form Yes if it were a part of the existing contract—
part of a single performance obligation that is partially satisfied at the that is, the adjustment to revenue is made
date of the contract modification? on a cumulative catch-up basis.
No
Are some of the remaining goods or services distinct and others not Yes Follow the guidance for distinct and non-
distinct? distinct remaining goods or services.
Distinct
Readily available resource = Sold separately Significant integration No significant Not highly depedent or
customisation or interrelated
or customer has already obtained services not provided modification
Promise to This will be considered as single performance Multiple Element m If the goods or services are not considered
transfer a series obligation, if the consumption of those Arrangements/ as distinct, those goods or services are
of distinct goods Goods and combined with other goods or services
services by the customers is symmetrical
or services services that are under the contract till the time the entity
i.e. they meet both of the following criteria: not distinct identifies a bundle of distinct goods or
(a) each distinct good or service would meet services.
the criteria to be a performance obligation m The combination would result in
satisfied over time; and accounting of multiple goods or services
(b) In each transfer, same method is used to in the contract as a single performance
obligation.
measure the entity’s progress towards
m An entity may end up accounting for all the
complete satisfaction of the performance goods or services promised in a contract
obligation. as a single performance obligation if the
entire bundle of promised goods and
services is the only distinct performance
obligation identified.
Warranties
Customer has option to purchase separately Customer does not have option to purchase separately
Distinct service, as the entity promises to provide service Warranty provides an assurance that the product complies
in addition to the product’s described functionality with agreed-upon specifications
Is the consideration payable to a customer a payment for a distinct good Yes Account for the consideration as a
or service from the customer? reduction of the transaction price.
No
Does the consideration exceed the fair value of the distinct goods or Yes Account for the excess as a reduction of
services that the entity receives from the customer? the transaction price.
No
Account for the purchase of the good or service in the same way that
the entity accounts for other purchases from suppliers.
Yes
Control is transferred
Control is over time
transferred at a No
point in time
Recognise as an asset
Recognise as under this standard if WITHIN THE SCOPE OF
an asset the costs: APPENDEIX
incremental
costs to obtain Operator does not recognise
a contract that All infrastructure as property, plant and
are expected to equipment or as a leased asset
be recovered.
Directly relate
to a contract (or
anticipated contract),
such as direct labour Does the Does the Does the
and materials, indirect operator operator operator
costs of production, have a have a have a
etc. contractual contractual contractual
right to right to right to
receive cash No charge users No charge users
or other of the public of the public
financial services as services as
asset from or described in described in
Generate or enhance at direction paragraph paragraph
resources that will of the 17 of 17 of
be used to satisfy grantor as Appendix? Appendix?
performance described in
obligations in the paragraph 16
future, AND of Appendix?
Yes Yes