Ind As 115 - Revenue from contracts with customer

Panty contracted with Entity to obtainGoods services

that are output of Entity's ordinary activities

in Exchange for Consideration

Nate Ind As 115 applies only if counterparty is a Customer

To Recognise Revenue Entity should apply Five steps Model

Step t Identify contact with customers
4Talati94 entered into contact to sell lift installation
of lift and 5gean
maintenance services

step 2 Identify Performance obligations in the contract

PO 1 Lift 2 installation
of lift 3 5yeans maintenanceservices

step 3 Determine Transaction Price

4 Expected Consideration T P E 50,00 0007

Steph Allocate transaction Price to performance obligations

Allocation 1 Lift 90,001000 2 Installation 200000 3 Maintenance 8000007

Step5 Recognize Revenue when Entity satisfies Performance obligations

I 25thmoney2001 Control
of Lift transferred RevenueRecognized 240,00100

21 10thApril 2001 Installation completed 7 Recognize Revenue E 200000

3 800000 recognized over a period of 5gears

 I 9 a

Step 1 - identify the Contract Written Oral or CustomaryRosiness Practices

Agreement bet Two on more parties that creates enforceable rights obligations

Contract exists only when arrangementmeets all Five criteria

1 All panties Approved the contract C And committed
21 Can identify each party's rights regarding goods services
to be folksflaked
3 Identity Paymentterms
4 Contract has commercial Substance
Prevent Entities bnom transbenning goods on services to each other for little
or no consideration to artificially inflate their revenue
5 Probable that Entity will collect substantially all consideration

To Assess Collectibility check customer Intention Ability to Pay

The Entity Can recognise revenue even if contractdo not exist in Below Cases
contract do not exist but Goods services transbeaded and has no
y
remaining obligations and substantially all consideration received and is
Non Refundable

2 contractdonotexist that whatever contract done is now terminated

and consideration deceived is Non Refundable
Step 2- identifying Performance obligations ExplicitonImplicit

In cases where Multiple Goods on services are promised in a single contract Entity
shall Identify whether there are more than one performance obligation

Eg Promise in a single contract to provide software Installation BunsMaintenance and

technical Support

Performance
obligations defined as a promise with a customer to transfer either
A Distinct Goods on service

B A series of distinctgoods on services that are substantially the same and

have samepattern of transfertothe customer

Kya wo separately sell

A Distinct Performance Obligations holey
Promised Goods services are Distinct criteria met
if both

i Goodon services is capable of being distinct i e

canbenefit from the individual good
Customer
on services on its own OR
Together With other readily available resources Eg Pendrivelectures software
Goodonservice that is soldseparately On

Customer has already obtained from Entity on from other transaction events

lil separately Identifiablefrom otherpromises in the contractwhich includes

a Significant Integration services notprovided E.g Personal computer Walen Purification

Ag water purification Plant where company is responsible for all aspects

incl Engineering and Design services procurementofPumps Physical const

site Preparation testing water quality and the integration of all components
 b Onegood on service donot significantly modify on Customise othergoodon service
Contract to transfer software licence perform installation and provide technical

support for 5years However as part of installation software to be substantially

customise to add new functionality to enable the software to interface with
other customised software application used by customer

C Goods onservices are not Highly interdependent on interrelated

Contract to Inoxide Pendrive lectures software licence and Books which are Highly

interdependent on interrelated

Few Points from Illustrations

1 Entity Provides Broadband voice call and modem separately 911 14

2 Design and Multiple level shopping centre with customer can panning where
entity may require to continually alter the design
of shopping centre and Ranking
facility during ion Highly intenaelated significant customisation modification

B Promise to transfer a Series of distinct goods on service that

are substantially the same on have same pattern of transfer
There might be cases where distinct goods on services are provided

continuously oxen a period of time Eg security services Bookkeeping

Hotel Management service etc

If Consumption
of those service is symmetrical it is considered as single
Performance obligation satisfied over a period
of time
 9 b of

step 2 Crux
1stcondition
Good on services Distinct if Benefit on its own on together with other readily
available resources

2ndcondition
Ydsepanaten
a Significant Integration service not provided
b Onegood on service do not significantly Modify customise other good on service

4 Not Highly interrelated on Interdependent

Computer
Notcomputer butcollection
Momen Board A
RAM F ofspareparts
w
ofcomputer
Handdish capableof a
8 separate P O
4 Monitory as being
e distinct
ups
keyboard a

Mouse t

mummify
 Eg Lenstant
Customer option for Additional goods & ser vices GiftCards loyalty points

If Entity Grants Additional night to customer which is material suchnight

is a separate Performance obligation

Eg Sale of Product A F 1000 consideration 45 A P E10007

91127 Discount on Future Purchase 401 frogmal Discounton all future sales 1077
Joy Chances that customer will redeem Discount Average purchase 500
501 500 807 900
I Performance obligation Xzot
E 1000
120
1st PO Product A
2nd P.o Future Discount E 120 500 801 307
1120

Total consideration deceived E 1000

Product A Future Discount
91000 1998 7 41000 1420 Y
892 E 108g
I
Recognize Revenue when Product Recognize Revenue when customer redeem
A control

is transferred discounton when it expires

Bank All
To Revenue 892
To Contract liability 108
Consignment Arrangements Delivery on consignmentBasis todistributor dealer
Agreement between consignee and consignon fon the storage transfer sale on
resaleand use of the goods

Indicators to evaluate whether

Arrangement is a consignment arrangement
to Product controlled
by entity untill sale to a customer on specified Period expires
2 to require return an transfer of product to another dealer
Entity able
3 No unconditional obligation forthe dealer to pay for the product

Revenue
not recognized ban consignment when goods delivered to consignee because

control not get transcended I 97 is recognized when control transferred

But in case of sale with eight to return revenue is recognized because

Control is transferred Irene customer decides whether to put back goods toseller

791125
Eng deliver 1000 dresses 220
consignen to consignee pen dress which consignee

shall pay when dress sold to end customer consignon has mightto require net
an transfer to anotherdealem State whether control transbeaded No
Principal US Agent consideration
When other panties are involved in providing goods on services to Entity's
customer the entity determine whether its penbonmance obligation is

To provide Good on service to arrange for anotherparty to

itself Principal provide Good on service agent
I
Revenue Recognized Revenue Recognized
is the Gross Amount is the net Amount
to which entity expects to be entitled I Entity's Fee on commission
Y

Indicators that Entity is a principal includes

1 Entity is primarily responsible for Fulfilling the contract

2 The Entity has inventory disk
3 Entity has discretion in establishing prices for Goods services

Non refundable upfront fees Club Membership Joining fees Telecom serviceActivation
bees

Does the fee relate to specific goods on services transferred to customer

Yes No
Account bag as a promised good Account for a Advance payment
on service Gon future good on service

Eh Customer buys new data connection and pays one time registration
The customer will be charged based on Data usage on monthly basis
 ang al ly
Here Customer will not benefit just from buying data card and data service
the Activity of registering and activating connection is not a service to customer
and therefore does not represent satisfaction of performance obligation

STEP 3 - DETERMINING TRANSACTION PRICE

The next step is to determine transaction price
The transaction Price is the amount of consideration to which entity
expects to be entitled in exchange for hoods services Exel GST
The consideration promised may include Fixed Amounts Variable Amounts
On Both
When determining transaction Price Entity shall consider effects of
D Variable Consideration 2 Significant Financing Component

3 Non cash consideration 4 consideration Payable to customer

1) Variable Consideration Incentives Performance Bonus Price Concessions

mefunds Credits Penalties etc

It may be fixed in amount but Entity's right to receive is contingent on a

future outcome I Eg Fixed Performance Bonus received only if target is met

Variable consideration is estimated using eitherofthe following methods

1 Expected Value Method 2 Most Likely Amount

E 1 M is appropriate when Entity has large M L A is appropriate if contract
number ofcontracts with similar characteristics has only two possible outcomes
more than two possible outcomes
 I 1

Note the choice is

the method which better predicts the amount
based on

of consideration to be entitled Lie No Free choice

Eq
Contract Fixed consideration 25 Gone
Variable Consideration

1 157 Bonus if Completed by30thmonth 251 Chance Morethan two

outcomes
104 Bonus if by
completed 32ndmonth
hot Chance
ExpectedValue Method
51 Bonus if completed by synmonth 154 chance
2 Quality Bonne E 2 Gone
of if inspector assign gold star rating
Got Chance 2 possible outcome Most lively amount y
5017

Fixed consideration 25cm

I Variable consideration included in Transaction price

Bonus Yale method
Expected

3 75 X 251 t 2 5 X hot I 1 25 X 154 T 0 207 2.125

Quality Bones Most likely Amount

6011not of getting a 2cgone Monelikely

2 4 125
29.125
Refund liabilities contractliability

Entity shall recognise a refund liability if it expects to refund someamount

of consideration liability is updated at the end of each reporting

received Refund

period Say Amount received 2100000 Refund Expected 7150007

RevenueRecognised 285000 Refund E 15000
liability
 d 3

Example191131
Entity sold to units of ProductA bom 21000 pen unit If a customer
Purchase more then 100 units in a F Y Price is retrospectively reduced to 900

Pen unit For the Mtg endedBomjane Entity sells 10units in total and estimates that

Purchase will not exceed too units fi e it is Highly Probable thatsignificantreversal

in Amount of Revenue will not occur when uncertainty is resolved
1st9 Ended Revenue Recognized tounit X 10007 E 10000

Funthem in 2nd d Ended 30hsept Entity sold 50 more units In the light ofnew
Fact Entity estimates that customer Purchase will exceed 100waits forthe F Y and
therefore require to retrospectively reduce price unit to E 900
2nd Revenue Recognised 50units X900 44000
9 Ended 10unitsX 1007
Refund liability contract liability 460units xtoo 6000

Reassessment
of variable consideration

At Each Reporting Period end Entity shall UPDATE estimated transaction price
including updating its assessment of whether Est ofvariable consideration is
constrained
Y 91132111 Imp
Example Fixed Fee Contract E 10100,000 Estimated costto complete E 950000

mmmm
Wt 701 950 101 E 100000
hmmmm
15thyears Entity believes that it will achieve 100000 incentive bees

At 4thyeand 11 11 11 11 11 11 250000 it

lostincurred Ya
50088
ii a 17508 in 24 8 57
877 52
50005.2077
Yah 2 2750
sa
Revenue to be
911 32 recognised Revenue cost Mangin
500
sty y
4100000011000007 50000 57895 50000 7895113671
2ndyr 1000000 T100000 X 17500950000 202632 175000 27032 13637
4000
3rdyr X 463158 400000 63158 13631
4 9100000071000007 50000

4thyr t 41060000 2500007 2750950000 361892

98684
185216
150000 62509 0000

460526 275000 185526140284

5Myr 741000000 2500007 X 500 50000 65789 50000 15789 247

300000

Sale with a right of return Refund against return credit Another productinExchang

In such cases RevenueRecognition shall be as per the substance of the arrangement

substance is that ofconsignmentsale other cases

a H

Account as perGuidance to Accountpom sales with a night of netty

related to

consignmentsales Recognise all of the following

a Revenue Excl products expected to be returned

b Rebund liability
4 Asset for itsright to recover product on
settling refund liability

Note An entity shall update refund liability at each reporting period end
and condespondingly adjust revenue
 E9 Sale of tooo products E to each Entity's lostof each product is E307
Customer can refund within 30days and receive full refund Usingexpected value

Method Entity estimates that 970 products will not be returned

bolt Revenue 1970 50 E 48500
Refund liability 930 507 21500
Assetfright to recover products 430 307 E 900

Accounting for restocking fees for goods expected to be returned

Fees levied to compensate entity for cost of mepackaging shipping reselling
at lower price to customer
Restocking fees for goods expected to be retained included in transactionprice
at contract inception and recorded as revenue when control of goods transfers

Warranties
Somewarranties provide customer with assurance other Wanmanties Provide customer with
service in addition to the assurance
that Productwill function as thepanties intended
service type Wannanty 7
because it complies with agreed upon specifications
option
Assurance type
warranty
Castomen has to purchase separately

Customerdoesnothaveoption to purchase
separately
Account ton Promisedalarmanty as Po
I andallocate a portion of transactionprice

Account as per Ind As 37 to that P O findAs1157

 1
Notes

1 If Warranty is required by law it is not a PO because It exist to protect

customer from mists of purchasing defective Products Assurance warranty

2 the longer the PO

coverageperiod the more likely that Promised alanmanty is a
because it is more likely to provide a service in addition to assurance warranty

3 If Entity Promises both Assurance

type and service type warranty but cannotmeasonably
account separately Entity shall account for both warranties as a single P.o

Eh Total transaction Price

for Sale ofComputer 939ns Extended Wanmanty 236000
11351 Assurance Warranty Provided for First 90 Days

StandAlone Price Computer 32000 Extended Warranty 4000

Entity Estimates it will incan E 2000 to mepain defects within 1stgo Days
Sol
Total Transaction Price9360007

Computer with Assurance Warranty E320007 Extended service warranty E 40007

Townnd Journal

Bank AK 32000 Bank 4000

To Revenue 32000 To contract liability hooo
Warranty Exp 2000 Nl
To Accrued Warranty 2000 Chit
Prov
Extended warranty seperately kinna milera
Assurance waranty Seperately kinna paindaina so teslai beglai P.O manera recording garna
single P.O manera Revenue book hunxa.Yo ta eauta milxa.Tara yo ta eauta obligation ho so
Obligation ho so provisioning garna jaruri xa Revenue vanna ta payiyena ni ta so Liabolity
dekha
2.Signi cant nancing component
The contract if
contains a significant financing component
atEep
lil Customer Pays before entity performs its obligation Gustomen loan to Entity
Gil Customer Pays after entity performs its obligation
Entity way to customer
IntIncome
Objective To recognise revenue at cash price equivalent amount which would
have received at the time of transferring control of goods on services
thefinancing component is presented separately from Revenue It is recognised as

Interestexpenses on incenestincome using Effective Interest method aspen IndAs109

E9 Cash Price 100000

selling
Promisedconsideration payable after 2 years Cashprice t toy interest
4100000 x 1.10727 121000
CASE I CASE 2

101 interestrate is commensurate with the 141 interestrate is commensurate with the

matethat would be reflected in a separate mate that would be reflected in a separate

financing transaction financing transaction

I Transaction Price 121099 or 100000 1 Transaction Price 121000 93105

11472
Financing Element 21000 Financing Element 27895
 Joanna Entries Journal Entries
MReceivables
100000 Receivables 93105
Revenue 100000 To Revenue 93105
Receivables 10000 Receivables 13035
ToAtenestIncome Mo 10000 ToAtenestIncome Mu 13035
Receivables 11000 Receivables 14860

ToIntenestIncome Pla 11000 ToIntenestIncome Pl 14860

of a
Bay 121000 BUY 121000

To Receivables 121000 To Receivables 121000

Ind As 115 Contains Overriding Provisions which specifies that contract would

not have significant financing component if any below factor exists

a customer at his discretion paid in Advance 9E9 Prepaid Recharge Cand

b Substantial consideration promised by customer is variable and timing of that

consideration varies on the basis of occurrence or Non occurrence of a Future
event not within the control of Customer on Entity E9 Sales Based Royalty

A Financing component may arises fan reason other than Finance

Fon E9 payment teams might Protectentity on Customers from other Party bailing

to adequately complete its obligations under contract

3. Non cash consideration Sharesof common stock Equity taste Equipment eh
To determine transaction Price an Entity shall
Receive
a Moshe Mon Cash consideration at painvalue I ftp.ofnee
b If Cannot reliably estimate Fainvalue measure consideration by reference to
stand alone selling price of good on service

Subsequent measurement of Noy cash consideration

ThinValve
Fain valueofMonCashConsideration Varies ofNoncash consideration varies
after contract inception becauseofits form Otherthan onlythe form
of consideration
Eng Change in price a Shane EG dueto Entity's performance
of
I N
The entity does not adjust transaction Apply the Guidance on variable consideration
Price and theconstraint when determining
transaction price

Customen Provided goods

on services Eg Material labour on Equipment
Assess it obtains control hoods on services
whether of those contributed

YES

contributed goods on services as non cash consideration

Account for
received onom customer Part of T P
Eg At contract Inception 20thMann Control on
Gls transferred 915thJuly
50000 shines received
onsell
Consideration

ofgoods 50000Stones Finale stone 77.5

Fainvalue 260Shame Inv In Shames950000 757Dr 3750000
i
Triangle To Revenue 50000 607 3000000
30,001000
TO FITPL FUTON 750000

Another Example

AtContract Inception subsequently of 915th

control

Consideration 50000Shares FainVale 7554 FainYale Folk

pong
Performance 8000 stonesfanidhl EntityExpects Performance will Performance Bonus Achieved
Bonus now be received
Joanna
Fainvalve Go Shane
I Revisedtransactiontwice Paxinshares Dr 4060000

Entity expects PerformanceBonus

50000
800074 X 7560 To Revenue 3480000

willnotbe achieved 34,80 000 TOFYTPLFXToy 580000

ITransactionPrice 30,001000
4500007607

4. Consideration payable to a Customer

Consideration payable to a customer includes cash Amount that entity pays on
expects to pay to the customer on to otherpanties who purchase entity's goods

on service from customer

It includes coupon on Houchen thatcan be applied against amounts owed to the entity
 A Consideration payable to customer is a payment not gon distinctgoods on
services such consideration payable is reduced from transaction Price

B ConsiderationPayable t notexceed Fain

consideration Account in sameway thatentity account
YateofGlsentity received for other purchases from suppliers
for distinctGfs

A
C ConsiderationPayable 4 consideration exceededFain Such excessreduced from transaction
809 distinctGfs YateofGlsentityreceived price

9 Pmatiatagati sold Goods to DK for considerationof 2 100000

As Dk sold
goods to Pratiutagati for consideration of 240000 butfainHate ofGoods entity
receives is E 25000
I Excess E 15000 40000 25000 reduced from transaction Price

i Transaction Price 100000 15000 85000

some common example of consideration Paid to customers are given below

I Slotting bees Fees to customer for displaying goods on store shelves are
reduced from transaction price

2 Co operative Advertising Arrangement Reimbursement

of lost incanned by mesellem
to advertise vendor's products I reduced from transaction prices

3 Price Protection Reimbursement of shortfall in the sales price received by retailer

for theHendon's Products oven a specifiedperiod oftime reduced from transaction price
STEP 4 - Allocating Transaction Price to Performance obligation

An Entity Shall Allocate transaction price to each Po on a relative stand

Alone price basis except for til allocating discount
and Disproportionate
ii allocating variable Consideration y Amount

UseOBSERVABLE Price 16Observable Stand AlonePriceavailableOtherwise Entity Should

Estimate Stand Alone Price using suitable methods
Suitable methods for estimating stand aloneselling price of a good on serviceinclude

a Adjusted Market Assessment Approach E.g coaching class

Evaluate Market in which entity sells goods services and estimate Price that a
customer in that manleetwould be
willing to Pay
Also include referring entity's competitors prices and adjusting those prices

to reflect entity's costs and margin

I Expected Colt plus mangin approach

Forecast its expected lost

of satisfying Po and then Add Appropriate Mangin

sometimes this method is not appropriate when

a lost not a significant input in setting prices
b Direct Fulfillment costnot easily identifiable

C Residual
Approach

Total Transaction Price Less sum of observable stand Alone price

of other goods on services
Note Entity shall allocate discount before using Residual Approach
 y ng
Residual Approach is used only if I
a
Entity sells good on service to different customer for a broad range of
amounts i e selling price is Highly variable

b Not yet established price and not previously sold on stand alone basis

Eg Transaction Price 2 10000 Allocation

oftransaction Pmic
Product 50 3373
A 5000 Directly observable 10000
000
MedugB 2500 AdjustedMagnetAssessment 10000 25095000 1667
Product C
75,9 9costplus Mangin 10000 759800 5000

9 Transaction
Paice 100000 Allocation
of Transaction Price
Product X 50000 50000 50000

Product Y 25000 combined sold 50000 y25000 17857

yoooo
Product 2 45000 y 609 E 50000 50000 450 32143
00
120000 100000
Alternative scenario

All Info same except 7 Transaction Price 2130000

ProductAlpha included
Alongithx 4,2 whichishighly variable BroadRange 15000 2450007
i Taglaction Price Allocated to Alpha ResidualApproach 130000 100000 30000

Variable consideration not allocated Proportionately

A Standalone price of Const
of Building 50100,000
Maintenance
of Building 10,001000
Transaction Price 4000000 Fixed t 500000 if const completed on time

Allocation
5000000
To Building ha ooooo x 6000000 T 500000 38 33,333
To Maintenance Goooooo x 5000000 T O 6,661667
6000000
4500000
Change in transaction price

subsequently if there is a change in transaction Price it will be re allocated

on the oasis of inception date standalone price of goods on services

EG Contraction inception Date variable

transaction Price 150000 Fixed F 50000 Performance Bonus

At inception Entity expects performance Bonus will not be achieved

P.O StandAlone Allocation

software 90000 150000 9098000 75000

Installation 30000 150000 398 00
25000
technical support 60000 150000 60988000 50000

nextyean contract still in progress

Now
Entity believes that Performance Bonus will be achieved RolledTp Looooo

Po StandaloneInception Standalone unment Allocation

✅ 95000 ❌ 200000 998000 100000

software 90000
✅ 30000
Installation 30000 35000 ❌ 200000 x 180000 33333
❌ 60000
60000 ✅ 50000 200000 x 66667
techsupport 180000
STEP 5 - Satisfying Performance obligation
Entity recognises revenue when it satisfies PO by transferring goods on
services an asset to a customer

An Assetis transferred when customer obtains control of asset

control of an asset refers to

a Ability to direct the use of and obtain substantially all remaining benefits

from the asset

b Ability to prevent others from directing the use and obtaining substantial
benefits

to be consider bun transfer of control

then Indicators

1 Entity has present right to payment b Customer has significantwish I newand

2 Customer has legal title to asset of ownership of asset
3 Entity Ad physical possession of asset 5 Customer has accepted the asset

At contract inception Entity must determine whether control turnsbenned over

a period oftime on at a point in time
An Entity transfers control oxen time if any below criteria are met
1 Customer simultaneously receives and consumes benefits as the entity
performs Ef security Guard service Payroll service

2 Asset that the customer controls is created on enhanced as the

entity
Performs Ef const in customer land 7
Due to contractual limitation on Practicallimitation
3 Asset do not have alternative use to the entity AND Entity has
enforceable night to payment bon performance completed to date
Eq Building a specialised Customised Asset that only customer can use on
Building Asset according to customer specifications
Cost incannedPlus Reasonable mangin

If any of the above criteria do not met control is transferred at

a point in time
Revenue recognised
If Control Efd over a period of time over a period oftime
at a point in time a u at a point intime

Revenue over
Methods
of measuring progress of Po satisfied over time period
A Output methods result B Input Methods Cobb
ants

Revenue
recognised based an Entity'sefforts
Revenue
recognised based on Measurement

valueofgoods on services cansbeamed on inputs Eg Resources consumed labour

till date E9 Surveys of performance hours expended machine hours used

completed to date appraisals of results costs incanned

achieved
Practical Expedient 10 Entity's efforts on Inputs expended evenly

18 company has Performance period

consideration throughout
right to
Recognise Revenue on a straight line
at Amount billed to the customer of
entity's performance completed to date Ball's
then Company
may recognise such Billed
Amount as Revenue
 methods
Input
When Cost Based Input method is used Following Adjustments are required

1 Cost
of wasted material Labour on other resources are ignored while
measuring alone in Progress

I When Cost incanned is not Proportionate to entity's progress then recognise

revenue to the extent of lost incanned Revenue recognition

of such
cost is appropriate if all below condition exists

a Goods do not represent distinct performance obligation

b Customer Obtains control of goods

4 Costof such good significant relative to total Cost

d Entity procures goods from wind panties and does not significantly
involve in manufacturing designing

Repurchase Agreements
Entity sells assets t Also promises on option to repurchase the asset

Three forms Repurchase Agreements

of
D Forward contract 2 call option 3 Putoption
Entity's obligation to Repurchase Entity's rightto Repurchase Entity's obligation to Repurchase

Asset Asset at customer request

Fonwandcontract calloption

Here Customer donotobtain control

of the Asset because do nothave ability to direct
theuse and obtain substantially all economic benefits
 Repurchase Agreement 2BPt Repurchase Price

Fonwandfealloption Putoption

ftp.p.P 75 p If BPP L SP ftp.P.P.ys.p If ftp.p.LS.p

A
A customerhassignificant A customerhassignificant
Financing Lease as Pee EconomicIncentivetoPatrick Economic IncentivetoPut

Arrangement indas 16 then Financing Arrangement Backthen Lease Arrangement

otherwise accountbona otherwise account bona

salewith aright toReturn salewith aright toReturn

Customer hassignificantEconomic incentive to exercise put option

if BP.P trice
Expected market

Eg Ripp 56000 EM.P 52000 HereProbablethatcustomer willexercise Putoption

Forward Calloption

A Financing Amnangement

If Repurchase price morethan or equal to original selling price

Eg Original selling price 250000
Rftp 7
s.pyFinareiyAnntft
Repurchase Paice Agreed 2 56000 Y
Journal

ContractInception BankAfc Dr 50000

TO Loan FL 50000
cost
Recognizeoven Repurchase InterestExp 6000 goin interest
team
to Loan 6000 ifoptionlapses
At thetimeofRepurchase Loan 56000 Wan 56000
OR
or option Lapses To Bann 56000 To Revenue 56000
B Leases As per Ind As 116

If Repurchase price less than original selling price

Eg Original selling price I 50000
Repurchase Paice Agreed E 35000

Difference bet's original Repurchase Price shall be

selling price and
recognised as Lease Income

f Hale Income E 15000 950000 350007

Remaining I 35000 will be recognized as Revenue if option lapses

Journal
BankAfc 50000

To Security Deposit FL 35000 fat Presentvalue

70 Unearned Lease Income 15000 Remaining Amount

Unearned lease Income 15000

To LeaseRentIncome Pk 15000
4215000 recognised overtheleaseteam i e time between sale and
Repurchase

Security Deposit 35000 security Deposit 35000

To Bank
on To Revenue 35000
H e
if Repurchased if option to repurchase
lapses
 Put option Cuetomen has the right to Put Back Asset

A FINANCING ARRANGEMENT

If Price Equals on greater than original selling price AND

Repurchase

Repurchase pricemore than Expected market rate

EG Original selling price 50000

Repurchaseprice 56000
Significant Economic

Expectedmarketvalue at the time of Repurchase 52000 YIncentivefor customer

Account as pen Financing arrangement only if S I E for customer

B SALE WITH A RIGHT TO RETURN

If Price Equals on greater than original selling price AND

Repurchase

Repurchase price Less than Expected market value

Original selling price 50000

Repurchaseprice 56000
No Significant Economic
Expectedmarketvalue at the time of Repurchase 60000 Y Incentivefor customer

Account as pen sale with a Right to return

C If Repurchase Price less than original selling price AND

Repurchase pricemore than Expected market rate
Therefore Customer has significant economic incentive to put Back
Apply find As 116

If customer has significant Economic incentive to put Back

no Apply
accounting
of sale with a Right to Return
Bill and hold
Contract under which Entity bills a customer for a product but metains
Physical possession due to customer's request
In such fate Entity should check whether control is transferred on not

To establish talusten
of control all below criteria should met
1 Reason bon Bill Hold substantive GEg Customer request
2 Product Identified separately as belonging to customer
3 Product currently ready for physical transfer to customer
4 Entity cannothave ability to use product on direct it to another Customer

D 16 Entity establishes that control is transferred Entity recognises revenue

for the goods

However Since Entity provides custodial services to customer it should
be identified as separate performance obligations and Transaction price
should be allocated to Goods transferred and custodial service
Refer 911 687

1 If Entity Establishes that control is not transferred Revenue recognition is

deferred antiq control is thusfeared

Contract cost
Contract Cost

Contract Acquisition Cost Contract Fulfillment Cost

Me A
lost to obtain a contract
Incremental costs incurred in fulfilling
which would not have been incurred a contract with a customer

if contract not obtained Eng Equipments Software

LEg hoods
Sales Commission on Fees payable Designing lost other
and services
only upon successful signing ofcontract

Such costs one capitalised and

amortized overthe contractteam

Cost incurred covered by other If notcoveredby

IndAs PPE Inventory ex otherand as
I
I Recognise as an Asset

Apply such respective and amontise over

Ind As Contract team

Mole Legal Fees ban draftingterms of arrangement boy panties to approve and
Sign Travel Expenses bon pitching new client contract salaries bon
People working on obtaining new clients These costs would have
incurred even if contract not obtained and therefore will not form
part of contract Acquisition cost and should be Expensed off in Pll
Ser vice concession arrangements Important
Private sector Entity An operator constructing upgrading the infrastructure

operating and maintaining that

used to provide public service and

infrastructure for a specified period of time

Infrastructure Roads Bridges Tunnels Hospitals Airports

The panty that Grants the service Ammangement Granton is usually a

Government on Public Sector Entity

Accounting Principles

Infrastructure shall not be recognised as PPE of the operator because

Service Ammangement does not convey
night to use of infrastructure to
openatom

the consideration given by Granton may be nights to

it A Financial Asset on Cii An Intangible Asset

Recognise Financial Asset to theextent RecogniseIntangible Asset to theextent

operator have a contractual right a
operator have a contractual right to
licence to change users
receive cash on another Financial of Public
Asset Service
Gram Granton

Cash Determinable Amoy Heme Nounconditional right to receive

Receivables Debtors cash because Amounts are contingent to

the extent that publicusestheservice

Financial
Ate
 W f

In both cases the consideration received on receivable is recognised initially at

FAIRVALUE
If the operation is paid partly by Financial asset and panty by Intangible Asset
Account separately for each component of operator service

Journal Entries

A Financial Asset An Intangible Asset

During Construction
decider During Construction
Asseyfaenpore
Financial xxx Intangible Asset Xxx

To const Revenue XXN To Revenueheat'Re XXX

4considerationreceivable mewquised affairMatvey 4considerationreceivable mewquised affairMatvey
Cost of Construction Xxx Cost of Construction xxx

To Bank XXX To Bank XXX

mecoguised asand when cost incurred mecoguised asandwhen cost incurred

Operation Phase Operation Phase

Financial Asset XXX AmontisationExp Me Xxx

ToFinance income XXX To Intangible Asset XXX
Interest Income On Financial Assetusing EIR Amortization of I A as per Ind As387
of ACM FYTOLI methods

Financial Asset XXX Bank Ale XXX

To Revenue XXX to Revenue lie.ru XXX
470recognise revenue relatingto operating 470recognise revenue relatingto operating

Phase Phase
 Bank Ale XXX

To Financial Asset XXX

when Amount received from Granton

Contract modi cation

Examples Partially terminating the Contract Extending contract team

Adding new goods service with on without change in price Reducing contract
price
A contract modification exist if below 3 conditions met

a Change in scope Price on both

b Change approved by both Entity and customer
4 Change is enforceable

Accounting for the modification

A separate contract

is Adding new distinct goods on services and

ill increase in price reflects stand Alone selling price for Additional goods

on services

Account for a separate contract

E9 Promise to sell 120 products E1000each 120000 oven six months
After Entity tod 60 distinctproduct contract is now modified ton
additional 30 products
of standalone selling price of E 950each
Ans New Additional Goods 4 Price reflect S A P SEPARATE CONTRACT
 B Not a separate Contract

AmeRemaining Gls distinctfrom Ameremaining91s notdistinct Ane someofremainingG1

Gfs tod beforecontractmodification and form partof single PO distinct and others not

distinct
Allocateremaining Transaction Price Recognise effect
of modification
not yet recognized to outstanding on a cumulative catchupBasisForDistinct915 Prospective

Performance obligation Refer gaugenation g ie Non Distinct Cumulative

catchup
Lie Prospective Basis Notnelwat
Refer Illustration 8 for E Ya

Combining contracts 911 4 5 6

Two or more as a single contractif they entered into at or

contracts accounted

near same time with same customer and if any below condition exist t

Il contracts negotiated as a package with single commercial objectives1911

Ii Consideration paid in one contract depends on price on performance

in other contract 191161
iii Goods on service promised in contract ane single P o 9115

Contract term
Contractual period oxen which Panties have present enforceable rights
and obligations
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