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Revenue from Contracts with Customers Omitted w.e.f. 30.3.2016

Ind AS - 115 - Old - B. Indian Accounting Standards (Ind AS) - Companies Law - Ind AS - 115 - Old - 1[********] - Notes:- 1. Omitted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, "Indian Accounting Standard (Ind AS) 115 Revenue from Contracts with Customers (The Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. Objective 1 The objective of this Standar .....

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e entity expects to be entitled in exchange for those goods or services. 3 An entity shall consider the terms of the contract and all relevant facts and circumstances when applying this Standard. An entity shall apply this Standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances. 4 This Standard specifies the accounting for an individual contract with a customer. However, as a practical expedient, an entity may a .....

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pe 5 An entity shall apply this Standard to all contracts with customers, except the following: (a) lease contracts within the scope of Ind AS 17, Leases; (b) insurance contracts within the scope of Ind AS 104, Insurance Contracts; (c) financial instruments and other contractual rights or obligations within the scope of Ind AS 109, Financial Instruments, Ind AS 110, Consolidated Financial Statements, Ind AS 111, Joint Arrangements, Ind AS 27, Separate Financial Statements and Ind AS 28, Investme .....

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to the contract is a customer. A customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity s ordinary activities in exchange for consideration. A counterparty to the contract would not be a customer if, for example, the counterparty has contracted with the entity to participate in an activity or process in which the parties to the contract share in the risks and benefits that result from the activity or process (such as developing an ass .....

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e transaction price the amount of the part (or parts) of the contract that are initially measured in accordance with other Standards and shall apply paragraphs 73-86 to allocate the amount of the transaction price that remains (if any) to each performance obligation within the scope of this Standard and to any other parts of the contract identified by paragraph 7(b). (b) If the other Standards do not specify how to separate and/or initially measure one or more parts of the contract, then the ent .....

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is within the scope of this Standard. Recognition Identifying the contract 9 An entity shall account for a contract with a customer that is within the scope of this Standard only when all of the following criteria are met: (a) the parties to the contract have approved the contract (in writing, orally or in accordance with other customary business practices) and are committed to perform their respective obligations; (b) the entity can identify each party s rights regarding the goods or services t .....

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f consideration is probable, an entity shall consider only the customer s ability and intention to pay that amount of consideration when it is due. The amount of consideration to which the entity will be entitled may be less than the price stated in the contract if the consideration is variable because the entity may offer the customer a price concession (see paragraph 52). 10 A contract is an agreement between two or more parties that creates enforceable rights and obligations. Enforceability o .....

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ther and when an agreement with a customer creates enforceable rights and obligations. 11 Some contracts with customers may have no fixed duration and can be terminated or modified by either party at any time. Other contracts may automatically renew on a periodic basis that is specified in the contract. An entity shall apply this Standard to the duration of the contract (ie the contractual period) in which the parties to the contract have present enforceable rights and obligations. 12 For the pu .....

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ed goods or services. 13 If a contract with a customer meets the criteria in paragraph 9 at contract inception, an entity shall not reassess those criteria unless there is an indication of a significant change in facts and circumstances. For example, if a customer s ability to pay the consideration deteriorates significantly, an entity would reassess whether it is probable that the entity will collect the consideration to which the entity will be entitled in exchange for the remaining goods or s .....

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) the entity has no remaining obligations to transfer goods or services to the customer and all, or substantially all, of the consideration promised by the customer has been received by the entity and is non-refundable; or (b) the contract has been terminated and the consideration received from the customer is non-refundable. 16 An entity shall recognise the consideration received from a customer as a liability until one of the events in paragraph 15 occurs or until the criteria in paragraph 9 a .....

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r related parties of the customer) and account for the contracts as a single contract if one or more of the following criteria are met: (a) the contracts are negotiated as a package with a single commercial objective; (b) the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or (c) the goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a single performance obligation in accordan .....

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ract. A contract modification could be approved in writing, by oral agreement or implied by customary business practices. If the parties to the contract have not approved a contract modification, an entity shall continue to apply this Standard to the existing contract until the contract modification is approved. 19 A contract modification may exist even though the parties to the contract have a dispute about the scope or price (or both) of the modification or the parties have approved a change i .....

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e to the transaction price arising from the modification in accordance with paragraphs 50-54 on estimating variable consideration and paragraphs 56-58 on constraining estimates of variable consideration. 20 An entity shall account for a contract modification as a separate contract if both of the following conditions are present: (a) the scope of the contract increases because of the addition of promised goods or services that are distinct (in accordance with paragraphs 26-30); and (b) the price .....

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selling a similar good or service to a new customer. 21 If a contract modification is not accounted for as a separate contract in accordance with paragraph 20, an entity shall account for the promised goods or services not yet transferred at the date of the contract modification (ie the remaining promised goods or services) in whichever of the following ways is applicable: (a) An entity shall account for the contract modification as if it were a termination of the existing contract and the crea .....

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was included in the estimate of the transaction price and that had not been recognised as revenue; and (ii) the consideration promised as part of the contract modification. (b) An entity shall account for the contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. The effect that the contract modificatio .....

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ied (including partially unsatisfied) performance obligations in the modified contract in a manner that is consistent with the objectives of this paragraph. Identifying performance obligations 22 At contract inception, an entity shall assess the goods or services promised in a contract with a customer and shall identify as a performance 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 (b) a series of distinc .....

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0, the same method would be used to measure the entity s progress towards complete satisfaction of the performance obligation to transfer each distinct good or service in the series to the customer. Promises in contracts with customers 24 A contract with a customer generally explicitly states the goods or services that an entity promises to transfer to a customer. However, the performance obligations identified in a contract with a customer may not be limited to the goods or services that are ex .....

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ties transfer a good or service to a customer. For example, a services provider may need to perform various administrative tasks to set up a contract. The performance of those tasks does not transfer a service to the customer as the tasks are performed. Therefore, those setup activities are not a performance obligation. Distinct goods or services 26 Depending on the contract, promised goods or services may include, but are not limited to, the following: (a) sale of goods produced by an entity (f .....

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ided on a when-and-if-available basis) or of making goods or services available for a customer to use as and when the customer decides; (f) providing a service of arranging for another party to transfer goods or services to a customer (for example, acting as an agent of another party, as described in paragraphs B34-B38); (g) granting rights to goods or services to be provided in the future that a customer can resell or provide to its customer (for example, an entity selling a product to a retail .....

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riteria are met: (a) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (ie the good or service is capable of being distinct); and (b) the entity s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (ie the good or service is distinct within the context of the contract). 28 A customer can benefit from a good or service in accordance with .....

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the entity or another entity) or a resource that the customer has already obtained from the entity (including goods or services that the entity will have already transferred to the customer under the contract) or from other transactions or events. Various factors may provide evidence that the customer can benefit from a good or service either on its own or in conjunction with other readily available resources. For example, the fact that the entity regularly sells a good or service separately wo .....

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ces that represent the combined output for which the customer has contracted. In other words, the entity is not using the good or service as an input to produce or deliver the combined output specified by the customer. (b) the good or service does not significantly modify or customise another good or service promised in the contract. (c) the good or service is not highly dependent on, or highly interrelated with, other goods or services promised in the contract. For example, the fact that a cust .....

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ld result in the entity accounting for all the goods or services promised in a contract as a single performance obligation. Satisfaction of performance obligations 31 An entity shall recognise revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service (ie an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset. 32 For each performance obligation identified in accordance with paragraphs 22-30, an e .....

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asset refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Control includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset. The benefits of an asset are the potential cash flows (inflows or savings in outflows) that can be obtained directly or indirectly in many ways, such as by: (a) using the asset to produce goods or provide services (including public services); (b) using .....

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ies a performance obligation and recognises revenue over time, if one of the following criteria is met: (a) the customer simultaneously receives and consumes the benefits provided by the entity s performance as the entity performs (see paragraphs B3-B4); (b) the entity s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced (see paragraph B5); or (c) the entity s performance does not create an asset with an alterna .....

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whether an asset has an alternative use to the entity is made at contract inception. After contract inception, an entity shall not update the assessment of the alternative use of an asset unless the parties to the contract approve a contract modification that substantively changes the performance obligation. Paragraphs B6-B8 provide guidance for assessing whether an asset has an alternative use to an entity. 37 An entity shall consider the terms of the contract, as well as any laws that apply t .....

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than the entity s failure to perform as promised. Paragraphs B9-B13 provide guidance for assessing the existence and enforceability of a right to payment and whether an entity s right to payment would entitle the entity to be paid for its performance completed to date. Performance obligations satisfied at a point in time 38 If a performance obligation is not satisfied over time in accordance with paragraphs 35- 37, an entity satisfies the performance obligation at a point in time. To determine t .....

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the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset in exchange. (b) The customer has legal title to the asset-legal title may indicate which party to a contract has the ability to direct the use of, and obtain substantially all of the remaining benefits from, an asset or to restrict the access of other entities to those benefits. Therefore, the transfer of legal title of an asset may indicate that the customer has obtained control of the ass .....

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fits. However, physical possession may not coincide with control of an asset. For example, in some repurchase agreements and in some consignment arrangements, a customer or consignee may have physical possession of an asset that the entity controls. Conversely, in some bill-and-hold arrangements, the entity may have physical possession of an asset that the customer controls. Paragraphs B64-B76, B77-B78 and B79-B82 provide guidance on accounting for repurchase agreements, consignment arrangements .....

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o a separate performance obligation in addition to the performance obligation to transfer the asset. For example, an entity may have transferred control of an asset to a customer but not yet satisfied an additional performance obligation to provide maintenance services related to the transferred asset. (e) The customer has accepted the asset-the customer s acceptance of an asset may indicate that it has obtained the ability to direct the use of, and obtain substantially all of the remaining bene .....

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objective when measuring progress is to depict an entity s performance in transferring control of goods or services promised to a customer (ie the satisfaction of an entity s performance obligation). 40 An entity shall apply a single method of measuring progress for each performance obligation satisfied over time and the entity shall apply that method consistently to similar performance obligations and in similar circumstances. At the end of each reporting period, an entity shall remeasure its p .....

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the entity promised to transfer to the customer. 42 When applying a method for measuring progress, an entity shall exclude from the measure of progress any goods or services for which the entity does not transfer control to a customer. Conversely, an entity shall include in the measure of progress any goods or services for which the entity does transfer control to a customer when satisfying that performance obligation. 43 As circumstances change over time, an entity shall update its measure of .....

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obligation. An entity would not be able to reasonably measure its progress towards complete satisfaction of a performance obligation if it lacks reliable information that would be required to apply an appropriate method of measuring progress. 45 In some circumstances (for example, in the early stages of a contract), an entity may not be able to reasonably measure the outcome of a performance obligation, but the entity expects to recover the costs incurred in satisfying the performance obligation .....

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ing the transaction price 47 An entity shall consider the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable .....

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paragraphs 66-69); and (e) consideration payable to a customer (see paragraphs 70-72). 49 For the purpose of determining the transaction price, an entity shall assume that the goods or services will be transferred to the customer as promised in accordance with the existing contract and that the contract will not be cancelled, renewed or modified. Variable consideration 50 If the consideration promised in a contract includes a variable amount, an entity shall estimate the amount of consideration .....

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er a product was sold with a right of return or a fixed amount is promised as a performance bonus on achievement of a specified milestone. 51AA In some contracts, penalties are specified. In such cases, penalties shall be accounted for as per the substance of the contract. Where the penalty is inherent in determination of transaction price, it shall form part of variable consideration. For example, where an entity agrees to transfer control of a good or service in a contact with customer at the .....

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ists: (a) the customer has a valid expectation arising from an entity s customary business practices, published policies or specific statements that the entity will accept an amount of consideration that is less than the price stated in the contract. That is, it is expected that the entity will offer a price concession. Depending on the jurisdiction, industry or customer this offer may be referred to as a discount, rebate, refund or credit. (b) other facts and circumstances indicate that the ent .....

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n appropriate estimate of the amount of variable consideration if an entity has a large number of contracts with similar characteristics. (b) The most likely amount-the most likely amount is the single most likely amount in a range of possible consideration amounts (ie the single most likely outcome of the contract). The most likely amount may be an appropriate estimate of the amount of variable consideration if the contract has only two possible outcomes (for example, an entity either achieves .....

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variable consideration would typically be similar to the information that the entity s management uses during the bid-and-proposal process and in establishing prices for promised goods or services. Refund liabilities 55 An entity shall recognise a refund liability if the entity receives consideration from a customer and expects to refund some or all of that consideration to the customer. A refund liability is measured at the amount of consideration received (or receivable) for which the entity .....

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saction price some or all of an amount of variable consideration estimated in accordance with paragraph 53 only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 57 In assessing whether it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur once the uncertainty related to .....

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isk of obsolescence of the promised good or service. (b) the uncertainty about the amount of consideration is not expected to be resolved for a long period of time. (c) the entity s experience (or other evidence) with similar types of contracts is limited, or that experience (or other evidence) has limited predictive value. (d) the entity has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances .....

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nstrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period. The entity shall account for changes in the transaction price in accordance with paragraphs 87-90. The existence of a significant financing component in the contract 60 In determining the transaction price, an entity shall adjust the promised amount of consideration for the effects of the time value of money if the timing of payments agreed .....

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adjusting the promised amount of consideration for a significant financing component is for an entity to recognise revenue at an amount that reflects the price that a customer would have paid for the promised goods or services if the customer had paid cash for those goods or services when (or as) they transfer to the customer (ie the cash selling price). An entity shall consider all relevant facts and circumstances in assessing whether a contract contains a financing component and whether that .....

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rket. 62 Notwithstanding the assessment in paragraph 61, a contract with a customer would not have a significant financing component if any of the following factors exist: (a) the customer paid for the goods or services in advance and the timing of the transfer of those goods or services is at the discretion of the customer. (b) a substantial amount of the consideration promised by the customer is variable and the amount or timing of that consideration varies on the basis of the occurrence or no .....

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he payment terms might provide the entity or the customer with protection from the other party failing to adequately complete some or all of its obligations under the contract. 63 As a practical expedient, an entity need not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good .....

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ity, including assets transferred in the contract. An entity may be able to determine that rate by identifying the rate that discounts the nominal amount of the promised consideration to the price that the customer would pay in cash for the goods or services when (or as) they transfer to the customer. After contract inception, an entity shall not update the discount rate for changes in interest rates or other circumstances (such as a change in the assessment of the customer s credit risk). 65 An .....

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er than cash, an entity shall measure the non-cash consideration (or promise of non-cash consideration) at fair value. 67 If an entity cannot reasonably estimate the fair value of the non-cash consideration, the entity shall measure the consideration indirectly by reference to the stand-alone selling price of the goods or services promised to the customer (or class of customer) in exchange for the consideration. 68 The fair value of the non-cash consideration may vary because of the form of the .....

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e an entity s fulfilment of the contract, the entity shall assess whether it obtains control of those contributed goods or services. If so, the entity shall account for the contributed goods or services as non-cash consideration received from the customer. Consideration payable to a customer 70 Consideration payable to a customer includes cash amounts that an entity pays, or expects to pay, to the customer (or to other parties that purchase the entity s goods or services from the customer). Cons .....

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customer transfers to the entity. If the consideration payable to a customer includes a variable amount, an entity shall estimate the transaction price (including assessing whether the estimate of variable consideration is constrained) in accordance with paragraphs 50-58. 71 If consideration payable to a customer is a payment for a distinct good or service from the customer, then an entity shall account for the purchase of the good or service in the same way that it accounts for other purchases .....

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sideration payable to a customer is accounted for as a reduction of the transaction price, an entity shall recognise the reduction of revenue when (or as) the later of either of the following events occurs: (a) the entity recognises revenue for the transfer of the related goods or services to the customer; and (b) the entity pays or promises to pay the consideration (even if the payment is conditional on a future event). That promise might be implied by the entity s customary business practices. .....

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mance obligation identified in the contract on a relative stand-alone selling price basis in accordance with paragraphs 76-80, except as specified in paragraphs 81-83 (for allocating discounts) and paragraphs 84-86 (for allocating consideration that includes variable amounts). 75 Paragraphs 76-86 do not apply if a contract has only one performance obligation. However, paragraphs 84-86 may apply if an entity promises to transfer a series of distinct goods or services identified as a single perfor .....

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-alone selling prices. 77 The stand-alone selling price is the price at which an entity would sell a promised good or service separately to a customer. The best evidence of a stand-alone selling price is the observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar customers. A contractually stated price or a list price for a good or service may be (but shall not be presumed to be) the stand-alone selling price of that goo .....

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ing so, an entity shall maximise the use of observable inputs and apply estimation methods consistently in similar circumstances. 79 Suitable methods for estimating the stand-alone selling price of a good or service include, but are not limited to, the following: (a) Adjusted market assessment approach-an entity could evaluate the market in which it sells goods or services and estimate the price that a customer in that market would be willing to pay for those goods or services. That approach mig .....

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he observable stand-alone selling prices of other goods or services promised in the contract. However, an entity may use a residual approach to estimate, in accordance with paragraph 78, the stand-alone selling price of a good or service only if one of the following criteria is met: (i) the entity sells the same good or service to different customers (at or near the same time) for a broad range of amounts (ie the selling price is highly variable because a representative stand-alone selling price .....

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prices. For example, an entity may use a residual approach to estimate the aggregate stand-alone selling price for those promised goods or services with highly variable or uncertain stand-alone selling prices and then use another method to estimate the stand-alone selling prices of the individual goods or services relative to that estimated aggregate stand-alone selling price determined by the residual approach. When an entity uses a combination of methods to estimate the stand-alone selling pri .....

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he contract exceeds the promised consideration in a contract. Except when an entity has observable evidence in accordance with paragraph 82 that the entire discount relates to only one or more, but not all, performance obligations in a contract, the entity shall allocate a discount proportionately to all performance obligations in the contract. The proportionate allocation of the discount in those circumstances is a consequence of the entity allocating the transaction price to each performance o .....

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f some of those distinct goods or services at a discount to the stand-alone selling prices of the goods or services in each bundle; and (c) the discount attributable to each bundle of goods or services described in paragraph 82(b) is substantially the same as the discount in the contract and an analysis of the goods or services in each bundle provides observable evidence of the performance obligation (or performance obligations) to which the entire discount in the contract belongs. 83 If a disco .....

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ne or more, but not all, performance obligations in the contract (for example, a bonus may be contingent on an entity transferring a promised good or service within a specified period of time); or (b) one or more, but not all, distinct goods or services promised in a series of distinct goods or services that forms part of a single performance obligation in accordance with paragraph 22(b) (for example, the consideration promised for the second year of a two-year cleaning service contract will inc .....

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service (or to a specific outcome from satisfying the performance obligation or transferring the distinct good or service); and (b) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective in paragraph 73 when considering all of the performance obligations and payment terms in the contract. 86 The allocation requirements in paragraphs 73-83 shall be applied to allocate the remaining amount .....

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the transaction price on the same basis as at contract inception. Consequently, an entity shall not reallocate the transaction price to reflect changes in stand-alone selling prices after contract inception. Amounts allocated to a satisfied performance obligation shall be recognised as revenue, or as a reduction of revenue, in the period in which the transaction price changes. 89 An entity shall allocate a change in the transaction price entirely to one or more, but not all, performance obligati .....

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87-89 to allocate the change in the transaction price in whichever of the following ways is applicable: (a) An entity shall allocate the change in the transaction price to the performance obligations identified in the contract before the modification if, and to the extent that, the change in the transaction price is attributable to an amount of variable consideration promised before the modification and the modification is accounted for in accordance with paragraph 21(a). (b) In all other cases .....

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the entity expects to recover those costs. 92 The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission). 93 Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained shall be recognised as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless .....

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38, Intangible Assets), an entity shall recognise an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria: (a) the costs relate directly to a contract or to an anticipated contract that the entity can specifically identify (for example, costs relating to services to be provided under renewal of an existing contract or costs of designing an asset to be transferred under a specific contract that has not yet been approved); (b) the costs generate .....

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abour (for example, salaries and wages of employees who provide the promised services directly to the customer); (b) direct materials (for example, supplies used in providing the promised services to a customer); (c) allocations of costs that relate directly to the contract or to contract activities (for example, costs of contract management and supervision, insurance and depreciation of tools and equipment used in fulfilling the contract); (d) costs that are explicitly chargeable to the custome .....

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he contract that were not reflected in the price of the contract; (c) costs that relate to satisfied performance obligations (or partially satisfied performance obligations) in the contract (ie costs that relate to past performance); and (d) costs for which an entity cannot distinguish whether the costs relate to unsatisfied performance obligations or to satisfied performance obligations (or partially satisfied performance obligations). Amortisation and impairment 99 An asset recognised in accor .....

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uch a change shall be accounted for as a change in accounting estimate in accordance with Ind AS 8. 101 An entity shall recognise an impairment loss in profit or loss to the extent that the carrying amount of an asset recognised in accordance with paragraph 91 or 95 exceeds: (a) the remaining amount of consideration that the entity expects to receive in exchange for the goods or services to which the asset relates; less (b) the costs that relate directly to providing those goods or services and .....

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recognised in accordance with paragraph 91 or 95, the entity shall recognise any impairment loss for assets related to the contract that are recognised in accordance with another Standard (for example, Ind AS 2, Ind AS 16 and Ind AS 38). After applying the impairment test in paragraph 101, an entity shall include the resulting carrying amount of the asset recognised in accordance with paragraph 91 or 95 in the carrying amount of the cash-generating unit to which it belongs for the purpose of ap .....

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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 present any unconditional rights to consideration separately as a receivable. 106 If a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (ie a receivable), before the entity transfers a good or service to .....

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present the contract as a contract asset, excluding any amounts presented as a receivable. A contract asset is an entity s right to consideration in exchange for goods or services that the entity has transferred to a customer. An entity shall assess a contract asset for impairment in accordance with Ind AS 109. An impairment of a contract asset shall be measured, presented and disclosed on the same basis as a financial asset that is within the scope of Ind AS 109 (see also paragraph 113(b)). 108 .....

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any difference between the measurement of the receivable in accordance with Ind AS 109 and the corresponding amount of revenue recognised shall be presented as an expense (for example, as an impairment loss). 109 This Standard uses the terms contract asset and contract liability but does not prohibit an entity from using alternative descriptions in the balance sheet for those items. If an entity uses an alternative description for a contract asset, the entity shall provide sufficient informatio .....

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ustomers. To achieve that objective, an entity shall disclose qualitative and quantitative information about all of the following: (a) its contracts with customers (see paragraphs 113-122); (b) the significant judgements, and changes in the judgements, made in applying this Standard to those contracts (see paragraphs 123-126); and (c) any assets recognised from the costs to obtain or fulfil a contract with a customer in accordance with paragraph 91 or 95 (see paragraphs 127-128). 111 An entity s .....

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n in accordance with another Standard. Contracts with customers 113 An entity shall disclose all of the following amounts for the reporting period unless those amounts are presented separately in the statement of profit and loss in accordance with other Standards: (a) revenue recognised from contracts with customers, which the entity shall disclose separately from its other sources of revenue; and (b) any impairment losses recognised (in accordance with Ind AS 109) on any receivables or contract .....

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revenue. 115 In addition, an entity shall disclose sufficient information to enable users of financial statements to understand the relationship between the disclosure of disaggregated revenue (in accordance with paragraph 114) and revenue information that is disclosed for each reportable segment, if the entity applies Ind AS 108, Operating Segments. Contract balances 116 An entity shall disclose all of the following: (a) the opening and closing balances of receivables, contract assets and contr .....

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(see paragraph 119(a)) relates to the typical timing of payment (see paragraph 119(b)) and the effect that those factors have on the contract asset and the contract liability balances. The explanation provided may use qualitative information. 118 An entity shall provide an explanation of the significant changes in the contract asset and the contract liability balances during the reporting period. The explanation shall include qualitative and quantitative information. Examples of changes in the e .....

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n; (c) impairment of a contract asset; (d) a change in the time frame for a right to consideration to become unconditional (ie for a contract asset to be reclassified to a receivable); and (e) a change in the time frame for a performance obligation to be satisfied (ie for the recognition of revenue arising from a contract liability). Performance obligations 119 An entity shall disclose information about its performance obligations in contracts with customers, including a description of all of th .....

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n is typically constrained in accordance with paragraphs 56-58); (c) the nature of the goods or services that the entity has promised to transfer, highlighting any performance obligations to arrange for another party to transfer goods or services (ie if the entity is acting as an agent); (d) obligations for returns, refunds and other similar obligations; and (e) types of warranties and related obligations. Transaction price allocated to the remaining performance obligations 120 An entity shall d .....

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ds that would be most appropriate for the duration of the remaining performance obligations; or (ii) by using qualitative information. 121 As a practical expedient, an entity need not disclose the information in paragraph 120 for a performance obligation if either of the following conditions is met: (a) the performance obligation is part of a contract that has an original expected duration of one year or less; or (b) the entity recognises revenue from the satisfaction of the performance obligati .....

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nificant judgements in the application of this Standard 123 An entity shall disclose the judgements, and changes in the judgements, made in applying this Standard that significantly affect the determination of the amount and timing of revenue from contracts with customers. In particular, an entity shall explain the judgements, and changes in the judgements, used in determining both of the following: (a) the timing of satisfaction of performance obligations (see paragraphs 124-125); and (b) the t .....

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f the transfer of goods or services. 125 For performance obligations satisfied at a point in time, an entity shall disclose the significant judgements made in evaluating when a customer obtains control of promised goods or services. Determining the transaction price and the amounts allocated to performance obligations 126 An entity shall disclose information about the methods, inputs and assumptions used for all of the following: (a) determining the transaction price, which includes, but is not .....

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ds and other similar obligations. 126AA An entity shall reconcile the amount of revenue recognised in the statement of profit and loss with the contracted price showing separately each of the adjustments made to the contract price, for example, on account of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, etc., specifying the nature and amount of each such adjustment separately. Assets recognised from the costs to obtain or fulfil a contract with a custo .....

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or 95), by main category of asset (for example, costs to obtain contracts with customers, precontract costs and setup costs); and (b) the amount of amortisation and any impairment losses recognised in the reporting period. Practical expedients 129 If an entity elects to use the practical expedient in either paragraph 63 (about the existence of a significant financing component) or paragraph 94 (about the incremental costs of obtaining a contract), the entity shall disclose that fact. Appendix A .....

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er for which the entity has received consideration (or the amount is due) from the customer. customer A party that has contracted with an entity to obtain goods or services that are an output of the entity s ordinary activities in exchange for consideration. income Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity part .....

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ce separately to a customer transaction price (for a contract with a customer) The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. Appendix B Application Guidance This appendix is an integral part of the Standard. It describes the application of paragraphs 1- 29 and has the same authority as the other parts of the Standard. B1 This application guidance .....

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phs B44-B47); (h) non-refundable upfront fees (and some related costs) (paragraphs B48-B51); (i) licensing (paragraphs B52-B63); (j) repurchase agreements (paragraphs B64-B76); (k) consignment arrangements (paragraphs B77-B78); (l) bill-and-hold arrangements (paragraphs B79-B82); (m) customer acceptance (paragraphs B83-B86); and (n) disclosure of disaggregated revenue (paragraphs B87-B89). Performance obligations satisfied over time B2 In accordance with paragraph 35, a performance obligation is .....

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B8) and the entity has an enforceable right to payment for performance completed to date (see paragraphs B9-B13). Simultaneous receipt and consumption of the benefits of the entity s performance (paragraph 35(a)) B3 For some types of performance obligations, the assessment of whether a customer receives the benefits of an entity s performance as the entity performs and simultaneously consumes those benefits as they are received will be straightforward. Examples include routine or recurring servi .....

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y would not need to substantially re-perform the work that the entity has completed to date if that other entity were to fulfil the remaining performance obligation to the customer. In determining whether another entity would not need to substantially re-perform the work the entity has completed to date, an entity shall make both of the following assumptions: (a) disregard potential contractual restrictions or practical limitations that otherwise would prevent the entity from transferring the re .....

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ccordance with paragraph 35(b), an entity shall apply the requirements for control in paragraphs 31-34 and 38. The asset that is being created or enhanced (for example, a work-in-progress asset) could be either tangible or intangible. Entity s performance does not create an asset with an alternative use (paragraph 35(c)) B6 In assessing whether an asset has an alternative use to an entity in accordance with paragraph 36, an entity shall consider the effects of contractual restrictions and practi .....

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restriction is substantive if a customer could enforce its rights to the promised asset if the entity sought to direct the asset for another use. In contrast, a contractual restriction is not substantive if, for example, an asset is largely interchangeable with other assets that the entity could transfer to another customer without breaching the contract and without incurring significant costs that otherwise would not have been incurred in relation to that contract. B8 A practical limitation on .....

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areas. Right to payment for performance completed to date (paragraph 35(c)) B9 In accordance with paragraph 37, an entity has a right to payment for performance completed to date if the entity would be entitled to an amount that at least compensates the entity for its performance completed to date in the event that the customer or another party terminates the contract for reasons other than the entity s failure to perform as promised. An amount that would compensate an entity for performance com .....

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should be entitled to compensation for either of the following amounts: (a) a proportion of the expected profit margin in the contract that reasonably reflects the extent of the entity s performance under the contract before termination by the customer (or another party); or (b) a reasonable return on the entity s cost of capital for similar contracts (or the entity s typical operating margin for similar contracts) if the contract-specific margin is higher than the return the entity usually gen .....

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formance completed to date if the contract were to be terminated before completion for reasons other than the entity s failure to perform as promised. B11 In some contracts, a customer may have a right to terminate the contract only at specified times during the life of the contract or the customer might not have any right to terminate the contract. If a customer acts to terminate a contract without having the right to terminate the contract at that time (including when a customer fails to perfo .....

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rform its obligations (which include paying the promised consideration). B12 In assessing the existence and enforceability of a right to payment for performance completed to date, an entity shall consider the contractual terms as well as any legislation or legal precedent that could supplement or override those contractual terms. This would include an assessment of whether: (a) legislation, administrative practice or legal precedent confers upon the entity a right to payment for performance to d .....

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r contracts, an entity would continue to have a right to payment to date if, in the contract with the customer, its right to payment for performance to date remains enforceable. B13 The payment schedule specified in a contract does not necessarily indicate whether an entity has an enforceable right to payment for performance completed to date. Although the payment schedule in a contract specifies the timing and amount of consideration that is payable by a customer, the payment schedule might not .....

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ligation satisfied over time in accordance with paragraphs 35-37 include the following: (a) output methods (see paragraphs B15-B17); and (b) input methods (see paragraphs B18-B19). Output methods B15 Output methods recognise revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. Output methods include methods such as surveys of performance completed to date, app .....

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ervices for which control has transferred to the customer. For example, output methods based on units produced or units delivered would not faithfully depict an entity s performance in satisfying a performance obligation if, at the end of the reporting period, the entity s performance has produced work in progress or finished goods controlled by the customer that are not included in the measurement of the output. B16 As a practical expedient, if an entity has a right to consideration from a cust .....

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e to an entity without undue cost. Therefore, an input method may be necessary. Input methods B18 Input methods recognise revenue on the basis of the entity s efforts or inputs to the satisfaction of a performance obligation (for example, resources consumed, labour hours expended, costs incurred, time elapsed or machine hours used) relative to the total expected inputs to the satisfaction of that performance obligation. If the entity s efforts or inputs are expended evenly throughout the perform .....

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s or services to the customer. For instance, when using a cost-based input method, an adjustment to the measure of progress may be required in the following circumstances: (a) When a cost incurred does not contribute to an entity s progress in satisfying the performance obligation. For example, an entity would not recognise revenue on the basis of costs incurred that are attributable to significant inefficiencies in the entity s performance that were not reflected in the price of the contract (f .....

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to recognise revenue at an amount equal to the cost of a good used to satisfy a performance obligation if the entity expects at contract inception that all of the following conditions would be met: (i) the good is not distinct; (ii) the customer is expected to obtain control of the good significantly before receiving services related to the good; (iii) the cost of the transferred good is significant relative to the total expected costs to completely satisfy the performance obligation; and (iv) .....

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refund of any consideration paid; (b) a credit that can be applied against amounts owed, or that will be owed, to the entity; and (c) another product in exchange. B20AA In some contracts, an entity transfers control of a product to a customer with an unconditional right of return. In such cases, the recognition of revenue shall be as per the substance of the arrangement. Where the substance is that of a consignment sale, the entity shall account for such a contract as per the provisions of para .....

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d); (b) a refund liability; and (c) an asset (and corresponding adjustment to cost of sales) for its right to recover products from customers on settling the refund liability. B22 An entity s promise to stand ready to accept a returned product during the return period shall not be accounted for as a performance obligation in addition to the obligation to provide a refund. B23 An entity shall apply the requirements in paragraphs 47-72 (including the requirements for constraining estimates of vari .....

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pdate its assessment of amounts for which it expects to be entitled in exchange for the transferred products and make a corresponding change to the transaction price and, therefore, in the amount of revenue recognised. B24 An entity shall update the measurement of the refund liability at the end of each reporting period for changes in expectations about the amount of refunds. An entity shall recognise corresponding adjustments as revenue (or reductions of revenue). B25 An asset recognised for an .....

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esent the asset separately from the refund liability. B26 Exchanges by customers of one product for another of the same type, quality, condition and price (for example, one colour or size for another) are not considered returns for the purposes of applying this Standard. B27 Contracts in which a customer may return a defective product in exchange for a functioning product shall be evaluated in accordance with the guidance on warranties in paragraphs B28-B33. Warranties B28 It is common for an en .....

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the assurance that the product complies with agreed-upon specifications. B29 If a customer has the option to purchase a warranty separately (for example, because the warranty is priced or negotiated separately), the warranty is a distinct service because the entity promises to provide the service to the customer in addition to the product that has the functionality described in the contract. In those circumstances, an entity shall account for the promised warranty as a performance obligation in .....

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oduct complies with agreed-upon specifications. B31 In assessing whether a warranty provides a customer with a service in addition to the assurance that the product complies with agreed-upon specifications, an entity shall consider factors such as: (a) Whether the warranty is required by law-if the entity is required by law to provide a warranty, the existence of that law indicates that the promised warranty is not a performance obligation because such requirements typically exist to protect cus .....

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a product complies with agreed-upon specifications (for example, a return shipping service for a defective product), then those tasks likely do not give rise to a performance obligation. B32 If a warranty, or a part of a warranty, provides a customer with a service in addition to the assurance that the product complies with agreed-upon specifications, the promised service is a performance obligation. Therefore, an entity shall allocate the transaction price to the product and the service. If an .....

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mple, to personal property) that might be caused by a consumer using a product for its intended purpose. Similarly, an entity s promise to indemnify the customer for liabilities and damages arising from claims of patent, copyright, trademark or other infringement by the entity s products does not give rise to a performance obligation. The entity shall account for such obligations in accordance with Ind AS 37. Principal versus agent considerations B34 When another party is involved in providing g .....

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l if the entity obtains legal title of a product only momentarily before legal title is transferred to a customer. An entity that is a principal in a contract may satisfy a performance obligation by itself or it may engage another party (for example, a subcontractor) to satisfy some or all of a performance obligation on its behalf. When an entity that is a principal satisfies a performance obligation, the entity recognises revenue in the gross amount of consideration to which it expects to be en .....

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t of consideration that the entity retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party. B37 Indicators that an entity is an agent (and therefore does not control the good or service before it is provided to a customer) include the following: (a) another party is primarily responsible for fulfilling the contract; (b) the entity does not have inventory risk before or after the goods have been ordered by a customer, duri .....

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and contractual rights in the contract so that the entity is no longer obliged to satisfy the performance obligation to transfer the promised good or service to the customer (ie the entity is no longer acting as the principal), the entity shall not recognise revenue for that performance obligation. Instead, the entity shall evaluate whether to recognise revenue for satisfying a performance obligation to obtain a contract for the other party (ie whether the entity is acting as an agent). Customer .....

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to the customer that it would not receive without entering into that contract (for example, a discount that is incremental to the range of discounts typically given for those goods or services to that class of customer in that geographical area or market). If the option provides a material right to the customer, the customer in effect pays the entity in advance for future goods or services and the entity recognises revenue when those future goods or services are transferred or when the option e .....

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or services. B42 Paragraph 74 requires an entity to allocate the transaction price to performance obligations on a relative stand-alone selling price basis. If the stand-alone selling price for a customer s option to acquire additional goods or services is not directly observable, an entity shall estimate it. That estimate shall reflect the discount that the customer would obtain when exercising the option, adjusted for both of the following: (a) any discount that the customer could receive wit .....

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erence to the goods or services expected to be provided and the corresponding expected consideration. Typically, those types of options are for contract renewals. Customers unexercised rights B44 In accordance with paragraph 106, upon receipt of a prepayment from a customer, an entity shall recognise a contract liability in the amount of the prepayment for its performance obligation to transfer, or to stand ready to transfer, goods or services in the future. An entity shall derecognise that cont .....

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to a breakage amount in a contract liability, the entity shall recognise the expected breakage amount as revenue in proportion to the pattern of rights exercised by the customer. If an entity does not expect to be entitled to a breakage amount, the entity shall recognise the expected breakage amount as revenue when the likelihood of the customer exercising its remaining rights becomes remote. To determine whether an entity expects to be entitled to a breakage amount, the entity shall consider t .....

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dable upfront fee at or near contract inception. Examples include joining fees in health club membership contracts, activation fees in telecommunication contracts, setup fees in some services contracts and initial fees in some supply contracts. B49 To identify performance obligations in such contracts, an entity shall assess whether the fee relates to the transfer of a promised good or service. In many cases, even though a non-refundable upfront fee relates to an activity that the entity is requ .....

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tract and that option provides the customer with a material right as described in paragraph B40. B50 If the non-refundable upfront fee relates to a good or service, the entity shall evaluate whether to account for the good or service as a separate performance obligation in accordance with paragraphs 22-30. B51 An entity may charge a non-refundable fee in part as compensation for costs incurred in setting up a contract (or other administrative tasks as described in paragraph 25). If those setup a .....

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ectual property of an entity. Licences of intellectual property may include, but are not limited to, any of the following: (a) software and technology; (b) motion pictures, music and other forms of media and entertainment; (c) franchises; and (d) patents, trademarks and copyrights. B53 In addition to a promise to grant a licence to a customer, an entity may also promise to transfer other goods or services to the customer. Those promises may be explicitly stated in the contract or implied by an e .....

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entity shall account for the promise to grant a licence and those other promised goods or services together as a single performance obligation. Examples of licences that are not distinct from other goods or services promised in the contract include the following: (a) a licence that forms a component of a tangible good and that is integral to the functionality of the good; and (b) a licence that the customer can benefit from only in conjunction with a related service (such as an online service p .....

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is a separate performance obligation, an entity shall determine whether the licence transfers to a customer either at a point in time or over time. In making this determination, an entity shall consider whether the nature of the entity s promise in granting the licence to a customer is to provide the customer with either: (a) a right to access the entity s intellectual property as it exists throughout the licence period; or (b) a right to use the entity s intellectual property as it exists at t .....

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cannot direct the use of, and obtain substantially all of the remaining benefits from, a licence at the point in time at which the licence is granted if the intellectual property to which the customer has rights changes throughout the licence period. The intellectual property will change (and thus affect the entity s assessment of when the customer controls the licence) when the entity continues to be involved with its intellectual property and the entity undertakes activities that significantl .....

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undertaken by the entity merely change its own asset (ie the underlying intellectual property), which may affect the entity s ability to provide future licences; however, those activities would not affect the determination of what the licence provides or what the customer controls. B58 The nature of an entity s promise in granting a licence is a promise to provide a right to access the entity s intellectual property if all of the following criteria are met: (a) the contract requires, or the cus .....

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icate that a customer could reasonably expect that an entity will undertake activities that significantly affect the intellectual property include the entity s customary business practices, published policies or specific statements. Although not determinative, the existence of a shared economic interest (for example, a sales-based royalty) between the entity and the customer related to the intellectual property to which the customer has rights may also indicate that the customer could reasonably .....

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ress towards complete satisfaction of that performance obligation to provide access. B61 If the criteria in paragraph B58 are not met, the nature of an entity s promise is to provide a right to use the entity s intellectual property as that intellectual property exists (in terms of form and functionality) at the point in time at which the licence is granted to the customer. This means that the customer can direct the use of, and obtain substantially all of the remaining benefits from, the licenc .....

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omer is able to use and benefit from the licence. For example, if a software licence period begins before an entity provides (or otherwise makes available) to the customer a code that enables the customer to immediately use the software, the entity would not recognise revenue before that code has been provided (or otherwise made available). B62 An entity shall disregard the following factors when determining whether a licence provides a right to access the entity s intellectual property or a rig .....

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act of defending a patent protects the value of the entity s intellectual property assets and provides assurance to the customer that the licence transferred meets the specifications of the licence promised in the contract. Sales-based or usage-based royalties B63 Notwithstanding the requirements in paragraphs 56-59, an entity shall recognise revenue for a sales-based or usage-based royalty promised in exchange for a licence of intellectual property only when (or as) the later of the following e .....

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ustomer, an asset that is substantially the same as that asset, or another asset of which the asset that was originally sold is a component. B65 Repurchase agreements generally come in three forms: (a) an entity s obligation to repurchase the asset (a forward); (b) an entity s right to repurchase the asset (a call option); and (c) an entity s obligation to repurchase the asset at the customer s request (a put option). A forward or a call option B66 If an entity has an obligation or a right to re .....

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that is less than the original selling price of the asset; or (b) a financing arrangement in accordance with paragraph B68 if the entity can or must repurchase the asset for an amount that is equal to or more than the original selling price of the asset. B67 When comparing the repurchase price with the selling price, an entity shall consider the time value of money. B68 If the repurchase agreement is a financing arrangement, the entity shall continue to recognise the asset and also recognise a f .....

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the customer s request (a put option) at a price that is lower than the original selling price of the asset, the entity shall consider at contract inception whether the customer has a significant economic incentive to exercise that right. The customer s exercising of that right results in the customer effectively paying the entity consideration for the right to use a specified asset for a period of time. Therefore, if the customer has a significant economic incentive to exercise that right, the .....

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y indicate that the customer has a significant economic incentive to exercise the put option. B72 If the customer does not have a significant economic incentive to exercise its right at a price that is lower than the original selling price of the asset, the entity shall account for the agreement as if it were the sale of a product with a right of return as described in paragraphs B20-B27. B73 If the repurchase price of the asset is equal to or greater than the original selling price and is more .....

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with a right of return as described in paragraphs B20-B27. B75 When comparing the repurchase price with the selling price, an entity shall consider the time value of money. B76 If the option lapses unexercised, an entity shall derecognise the liability and recognise revenue. Consignment arrangements B77 When an entity delivers a product to another party (such as a dealer or a distributor) for sale to end customers, the entity shall evaluate whether that other party has obtained control of the p .....

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event occurs, such as the sale of the product to a customer of the dealer or until a specified period expires; (b) the entity is able to require the return of the product or transfer the product to a third party (such as another dealer); and (c) the dealer does not have an unconditional obligation to pay for the product (although it might be required to pay a deposit). Bill-and-hold arrangements B79 A bill-and-hold arrangement is a contract under which an entity bills a customer for a product b .....

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e paragraph 38). For some contracts, control is transferred either when the product is delivered to the customer s site or when the product is shipped, depending on the terms of the contract (including delivery and shipping terms). However, for some contracts, a customer may obtain control of a product even though that product remains in an entity s physical possession. In that case, the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, t .....

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e substantive (for example, the customer has requested the arrangement); (b) the product must be identified separately as belonging to the customer; (c) the product currently must be ready for physical transfer to the customer; and (d) the entity cannot have the ability to use the product or to direct it to another customer. B82 If an entity recognises revenue for the sale of a product on a bill-and-hold basis, the entity shall consider whether it has remaining performance obligations (for examp .....

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tions. An entity shall consider such clauses when evaluating when a customer obtains control of a good or service. B84 If an entity can objectively determine that control of a good or service has been transferred to the customer in accordance with the agreed-upon specifications in the contract, then customer acceptance is a formality that would not affect the entity s determination of when the customer has obtained control of the good or service. For example, if the customer acceptance clause is .....

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are any remaining performance obligations (for example, installation of equipment) and evaluate whether to account for them separately. B85 However, if an entity cannot objectively determine that the good or service provided to the customer is in accordance with the agreed-upon specifications in the contract, then the entity would not be able to conclude that the customer has obtained control until the entity receives the customer s acceptance. That is because in that circumstance the entity ca .....

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agraph 114 requires an entity to disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Consequently, the extent to which an entity s revenue is disaggregated for the purposes of this disclosure depends on the facts and circumstances that pertain to the entity s contracts with customers. Some entities may need to use more than one type of category to meet the objecti .....

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ntations); (b) information regularly reviewed by the chief operating decision maker for evaluating the financial performance of operating segments; and (c) other information that is similar to the types of information identified in paragraph B88(a) and (b) and that is used by the entity or users of the entity s financial statements to evaluate the entity s financial performance or make resource allocation decisions. B89 Examples of categories that might be appropriate include, but are not limite .....

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omers at a point in time and revenue from goods or services transferred over time); and (g) sales channels (for example, goods sold directly to consumers and goods sold through intermediaries). Appendix C Service Concession Arrangements This appendix is an integral part of the Standard. Background 1 Infrastructure for public services-such as roads, bridges, tunnels, prisons, hospitals, airports, water distribution facilities, energy supply and telecommunication networks- has traditionally been c .....

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ntity (an operator) constructing the infrastructure used to provide the public service or upgrading it (for example, by increasing its capacity) and operating and maintaining that infrastructure for a specified period of time. The operator is paid for its services over the period of the arrangement. The arrangement is governed by a contract that sets out performance standards, mechanisms for adjusting prices, and arrangements for arbitrating disputes. Such an arrangement is often described as a .....

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of the public sector entity. Other common features are: (a) the party that grants the service arrangement (the grantor) is a public sector entity, including a governmental body, or a private sector entity to which the responsibility for the service has been devolved. (b) the operator is responsible for at least some of the management of the infrastructure and related services and does not merely act as an agent on behalf of the grantor. (c) the contract sets the initial prices to be levied by th .....

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concession arrangements if: (a) the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price; and (b) the grantor controls-through ownership, beneficial entitlement or otherwise- any significant residual interest in the infrastructure at the end of the term of the arrangement. 6 Infrastructure used in a public-to-private service concession arrangement for its entire useful life (whole of life assets) is within .....

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the grantor gives the operator access for the purpose of the service arrangement. 8 This Appendix does not specify the accounting for infrastructure that was held and recognised as property, plant and equipment by the operator before entering the service arrangement. The derecognition requirements of Ind ASs (as set out in Ind AS 16) apply to such infrastructure. 9 This Appendix does not specify the accounting by grantors. Issues 10 This Appendix sets out general principles on recognising and m .....

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of a financial asset and an intangible asset; and (g) items provided to the operator by the grantor. Accounting Principles Treatment of the operator s rights over the infrastructure 11 Infrastructure within the scope of this Appendix shall not be recognised as property, plant and equipment of the operator because the contractual service arrangement does not convey the right to control the use of the public service infrastructure to the operator. The operator has access to operate the infrastruct .....

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riod of time. 13 The operator shall recognise and measure revenue in accordance with Ind AS 115 for the services it performs. The nature of the consideration determines its subsequent accounting treatment. The subsequent accounting for consideration received as a financial asset and as an intangible asset is detailed in paragraphs 23-26 of this Appendix. Construction or upgrade services 14 The operator shall account for construction or upgrade services in accordance with Ind AS 115. Consideratio .....

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struction services; the grantor has little, if any, discretion to avoid payment, usually because the agreement is enforceable by law. The operator has an unconditional right to receive cash if the grantor contractually guarantees to pay the operator (a) specified or determinable amounts or (b) the shortfall, if any, between amounts received from users of the public service and specified or determinable amounts, even if payment is contingent on the operator ensuring that the infrastructure meets .....

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account separately for each component of the operator s consideration. The consideration received or receivable for both components shall be recognised initially in accordance with Ind AS 115. 19 The nature of the consideration given by the grantor to the operator shall be determined by reference to the contract terms and, when it exists, relevant contract law. The nature of the consideration determines the subsequent accounting as described in paragraphs 23-26 of this Appendix. However, both t .....

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to restore the infrastructure to a specified condition before it is handed over to the grantor at the end of the service arrangement. These contractual obligations to maintain or restore infrastructure, except for any upgrade element (see paragraph 14 of this Appendix), shall be recognised and measured in accordance with Ind AS 37, ie at the best estimate of the expenditure that would be required to settle the present obligation at the end of the reporting period. Borrowing costs incurred by th .....

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ply to the financial asset recognised under paragraphs 16 and 18 of this Appendix. 24 The amount due from or at the direction of the grantor is accounted for in accordance with Ind AS 109 as measured at: (a) amortised cost; (b) fair value through other comprehensive income; or (c) fair value through profit or loss. 25 If the amount due from the grantor is measured at amortised cost or fair value through other comprehensive income, Ind AS 109 requires interest calculated using the effective inter .....

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perator is given access by the grantor for the purposes of the service arrangement are not recognised as property, plant and equipment of the operator. The grantor may also provide other items to the operator that the operator can keep or deal with as it wishes. If such assets form part of the consideration payable by the grantor for the services, they are not government grants as defined in Ind AS 20. Instead, they are accounted for as part of the transaction price as defined in Ind AS 115. App .....

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significant residual interest in the infrastructure at the end of the term of the arrangement. AG2 The control or regulation referred to in condition (a) could be by contract or otherwise (such as through a regulator), and includes circumstances in which the grantor buys all of the output as well as those in which some or all of the output is bought by other users. In applying this condition, the grantor and any related parties shall be considered together. If the grantor is a public sector enti .....

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such as a cap that will apply only in remote circumstances, shall be ignored. Conversely, if for example, a contract purports to give the operator freedom to set prices, but any excess profit is returned to the grantor, the operator s return is capped and the price element of the control test is met. AG4 For the purpose of condition (b), the grantor s control over any significant residual interest should both restrict the operator s practical ability to sell or pledge the infrastructure and giv .....

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rator is only managing the infrastructure on the grantor s behalf-even though, in many cases, it may have wide managerial discretion. AG6 Conditions (a) and (b) together identify when the infrastructure, including any replacements required (see paragraph 21 of Appendix C), is controlled by the grantor for the whole of its economic life. For example, if the operator has to replace part of an item of infrastructure during the period of the arrangement (eg the top layer of a road or the roof of a b .....

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separable and capable of being operated independently and meets the definition of a cash-generating unit as defined in Ind AS 36 shall be analysed separately if it is used wholly for unregulated purposes. For example, this might apply to a private wing of a hospital, where the remainder of the hospital is used by the grantor to treat public patients. (b) when purely ancillary activities (such as a hospital shop) are unregulated, the control tests shall be applied as if those services did not ex .....

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tor; if so, it shall be accounted for in accordance with Ind AS 17. Appendix D Service Concession Arrangements: Disclosures This Appendix is an integral part of the Standard. Issue 1 An entity (the operator) may enter into an arrangement with another entity (the grantor) to provide services that give the public access to major economic and social facilities. The grantor may be a public or private sector entity, including a governmental body. Examples of service concession arrangements involve wa .....

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rovide services that give the public access to major economic and social facilities, and (b) in some cases, the right to use specified tangible assets, intangible assets, or financial assets, in exchange for the operator: (c) committing to provide the services according to certain terms and conditions during the concession period, and (d) when applicable, committing to return at the end of the concession period the rights received at the beginning of the concession period and/or acquired during .....

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nt and equipment, Ind AS 17 applies to leases of assets, and Ind AS 38 applies to acquisitions of intangible assets). However, a service concession arrangement may involve executory contracts that are not addressed in Indian Accounting Standards, unless the contracts are onerous, in which case Ind AS 37 applies. Therefore, this Appendix addresses additional disclosures of service concession arrangements. Accounting Principles 6 All aspects of a service concession arrangement shall be considered .....

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ecified assets; (ii) obligations to provide or rights to expect provision of services; (iii) obligations to acquire or build items of property, plant and equipment; (iv) obligations to deliver or rights to receive specified assets at the end of the concession period; (v) renewal and termination options; and (vi) other rights and obligations (eg major overhauls); (d) changes in the arrangement occurring during the period; and (e) how the service arrangement has been classified. 6A An operator sha .....

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mmunications and water treatment services). Appendix E References to matters contained in other Indian Accounting Standards This appendix is an integral part of the Ind AS. This appendix lists the appendices which are part of other Indian Accounting Standards and make reference to Ind AS 115, Revenue from Contracts with Customers. 1 Appendix B, Evaluating the Substance of Transactions involving the Legal Form of a Lease contained in Ind AS 17, Leases. 2 Appendix A, Intangible Assets-Web Site Cos .....

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