TMI BlogCompanies (Indian Accounting Standards) (Amendment) Rules, 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... Banking Financial Company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and includes Housing Finance Companies, Merchant Banking companies, Micro Finance Companies, Mutual Benefit Companies, Venture Capital Fund Companies, Stock Broker or Sub-Broker Companies, Nidhi Companies, Chit Companies, Securitisation and Reconstruction Companies, Mortgage Guarantee Companies, Pension Fund Companies, Asset Management Companies and Core Investment Companies. . 3. In the principal rules, in rule 4 ,- (I) in sub-rule (1),- (a) in clause (i), for the words any company the words any company and its holding, subsidiary, joint venture or associate company shall be substituted; (b) after clause (iii), the following clauses shall be inserted, namely:- (iv) Notwithstanding the requirement of clauses (i) to (iii), Non-Banking Financial Companies (NBFCs) shall comply with the Indian Accounting Standards (Ind ASs) in preparation of their financial statements and audit respectively, in the following manner, namely:- (a) The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods beginning on or after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a joint venture, the parent has to prepare Ind AS-compliant consolidated financial statements and the NBFC subsidiary, associate and a joint venture has to provide the relevant financial statement data in accordance with the accounting policies followed by the parent company for consolidation purposes (until the NBFC is covered under clause (iv) of sub-rule (1). (v) Notwithstanding clauses (i) to (iv), the holding, subsidiary, joint venture or associate companies of Scheduled commercial banks (excluding RRBs) would be required to prepare Ind AS based financial statements for accounting periods beginning from 1st April, 2018 onwards, with comparatives for the periods ending 31st March, 2018 or thereafter: ; (II) in sub-rule (2), for the words brackets and figure sub-rule (1) the words, brackets and figures clause (i), (ii) and (iii) of sub-rule (1) , shall be substituted, wherever they occur; (III) after sub-rule (2), the following sub-rule shall be inserted, namely:- (2A) For the purposes of calculation of net worth of Non-Banking Financial Companies covered under clause (iv) of sub-rule (1), the following principles shall apply, namely:- (a) the net wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , under the heading B. Indian Accounting Standards (Ind AS) in Indian Accounting Standard (Ind AS) 101 , - (i) for paragraph 30, the following paragraph shall be substituted, namely:- 30 If an entity uses fair value in its opening Ind AS Balance Sheet as deemed cost for an item of property, plant and equipment or an intangible asset (see paragraphs D5 and D7), the entity s first Ind AS financial statements shall disclose, for each line item in the opening Ind AS Balance Sheet: (a) the aggregate of those fair values; and (b) the aggregate adjustment to the carrying amounts reported under previous GAAP. ; (ii) in Appendix D,- (a) in paragraph D1, for item (m), the following item shall be substituted, namely:- (m) financial assets or intangible assets accounted for in accordance with Appendix A to Ind AS 11 Service Concession Arrangements (paragraph D22); ; (b) for paragraph D7, the following paragraph shall be substituted, namely:- D7 The elections in paragraphs D5 and D6 are also available for: (a) Omitted*; (b) intangible assets that meet: (i) the recognition criteria in Ind AS 38 (including reliable measurement of original cost); a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standard. However, in order to maintain consistency with paragraph numbers of IFRS 1, the paragraph numbers are retained in Ind AS 101. . 6. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 103 , for paragraphs 56, the following paragraph shall be substituted, namely:- 56 After initial recognition and until the liability is settled, cancelled or expires, the acquirer shall measure a contingent liability recognised in a business combination at the higher of: (a) the amount that would be recognised in accordance with Ind AS 37; and (b) the amount initially recognised less, if appropriate, cumulative amortisation recognised in accordance with Ind AS 18, Revenue. This requirement does not apply to contracts accounted for in accordance with Ind AS 109. . 7. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 104 , (i) in paragraph 4, for item (a), the following item shall be substituted, namely:- (a) product warranties issued directly by a manufacturer, dealer or ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset (or disposal group) as held for sale or as held for distribution to owners, but the criteria in paragraphs 7 9 (for held for sale) or in paragraph 12A (for held for distribution to owners) are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale or held for distribution to owners (respectively). In such cases an entity shall follow the guidance in paragraphs 27 29 to account for this change except when paragraph 26A applies. ; (ii) after paragraph 26, following paragraph shall be inserted namely:- 26A. If an entity reclassifies an asset (or disposal group) directly from being held for sale to being held for distribution to owners, or directly from being held for distribution to owners to being held for sale, then the change in classification is considered a continuation of the original plan of disposal. The entity: (a) shall not follow the guidance in paragraphs 27 29 to account for this change. The entity shall apply the classification, presentation and measurement requirements in this Ind AS that are applicable to the new method of disposal. (b) shall measure the non-current asset (or disposal group) by following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng paragraph shall be substituted, namely:- 29 If an entity removes an individual asset or liability from a disposal group classified as held for sale, the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group only if the group meets the criteria in paragraphs 7 9. If an entity removes an individual asset or liability from a disposal group classified as held for distribution to owners, the remaining assets and liabilities of the disposal group to be distributed shall continue to be measured as a group only if the group meets the criteria in paragraph 12A. Otherwise, the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale (or as held for distribution to owners) shall be measured individually at the lower of their carrying amounts and fair values less costs to sell (or costs to distribute) at that date. Any non-current assets that do not meet the criteria for held for sale shall cease to be classified as held for sale in accordance with paragraph 26. Any non-current assets that do not meet the criteria for held for distribution to owners shall cease to be classified a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts or obligations inherent in the transferred financial asset nor acquires any new contractual rights or obligations relating to the transferred financial asset. An entity does not have continuing involvement in a transferred financial asset if it has neither an interest in the future performance of the transferred financial asset nor a responsibility under any circumstances to make payments in respect of the transferred financial asset in the future. The term payment in this context does not include cash flows of the transferred financial asset that an entity collects and is required to remit to the transferee. ; (d) after paragraph B30, the following paragraph shall be inserted, namely:- B30A When an entity transfers a financial asset, the entity may retain the right to service that financial asset for a fee that is included in, for example, a servicing contract. The entity assesses the servicing contract in accordance with the guidance in paragraphs 42C and B30 to decide whether the entity has continuing involvement as a result of the servicing contract for the purposes of the disclosure requirements. For example, a servicer will have continuing involvement in the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity shall measure a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. ; (vi) paragraph 5.1.3 shall be omitted*, (vii) for paragraph 5.5.1, the following paragraph shall be substituted, namely:- 5.5.1 An entity shall recognise a loss allowance for expected credit losses on a financial asset that is measured in accordance with paragraphs 4.1.2 or 4.1.2A, a lease receivable, a loan commitment and a financial guarantee contract to which the impairment requirements apply in accordance with paragraphs 2.1(g), 4.2.1(c) or 4.2.1(d). ; (viii) for paragraph 5.5.15, the following paragraph shall be substituted, namely:- 5.5.15 Despite paragraphs 5.5.3 and 5.5.5, an entity shall always measure the loss allowance at an amount equal to lifetime expected credit losses for: (a) trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly measured at the guarantee amount plus the fair value of the guarantee (which is normally the consideration received for the guarantee). Subsequently, the initial fair value of the guarantee is recognised in profit or loss on a time proportion basis (see Ind AS 18) and the carrying value of the asset is reduced by any loss allowance. ; (e) for paragraph B5.4.3, the following paragraph shall be substituted namely:- B5.4.3 Fees that are not an integral part of the effective interest rate of a financial instrument and are accounted for in accordance with Ind AS 18 include: (a) fees charged for servicing a loan; (b) commitment fees to originate a loan when the loan commitment is not measured in accordance with paragraph 4.2.1(a) and it is unlikely that a specific lending arrangement will be entered into; and (c) loan syndication fees received by an entity that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants). ; (xi) in Appendix E, for paragraph 2, the following paragraph shall be substituted namely:- 2. Appendix A, Service Concession Arrangeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services, investment management, investment support and administrative services), either directly or through a subsidiary, to third parties as well as to its investors, even if those activities are substantial to the entity, subject to the entity continuing to meet the definition of an investment entity. ; (b) for paragraph B85E, the following paragraph shall be substituted namely:- B85E If an investment entity has a subsidiary that is not itself an investment entity and whose main purpose and activities are providing investment-related services or activities that relate to the investment entity s investment activities, such as those described in paragraphs B85C B85D, to the entity or other parties, it shall consolidate that subsidiary in accordance with paragraph 32. If the subsidiary that provides the investment-related services or activities is itself an investment entity, the investment entity parent shall measure that subsidiary at fair value through profit or loss in accordance with paragraph 31. ; (vii) in Appendix 1, after paragraph 3, following paragraph shall be inserted, namely:- 4. Following paragraph numbers appear as Deleted in IFRS 10. In order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at disclosure is not material except when required by law. This is the case even if the Ind AS contains a list of specific requirements or describes them as minimum requirements. An entity shall also consider whether to provide additional disclosures when compliance with the specific requirements in Ind AS is insufficient to enable users of financial statements to understand the impact of particular transactions, other events and conditions on the entity s financial position and financial performance. ; (iv) for paragraph 34, the following paragraph shall be substituted, namely:- 34 Ind AS 18, Revenue, defines revenue and requires an entity to measure it at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates the entity allows. An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. An entity presents the results of such transactions, when this presentation reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and joint ventures accounted for using the equity method, separated into the share of items that, in accordance with other Ind ASs: (i) will not be reclassified subsequently to profit or loss; and (ii) will be reclassified subsequently to profit or loss when specific conditions are met. ; (ix) for paragraph 85, the following paragraph shall be substituted, namely:- 85 An entity shall present additional line items (including by disaggregating the line items listed in paragraph 82), headings and subtotals in the statement of profit and loss, when such presentation is relevant to an understanding of the entity s financial performance. ; (x) after paragraph 85, the following paragraphs shall be inserted, namely:- 85A When an entity presents subtotals in accordance with paragraph 85, those subtotals shall: (a) be comprised of line items made up of amounts recognised and measured in accordance with Ind AS; (b) be presented and labelled in a manner that makes the line items that constitute the subtotal clear and understandable; (c) be consistent from period to period, in accordance with paragraph 45; and (d) not be displayed with more prominence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting policies used that are relevant to an understanding of the financial statements. ; (xv) for paragraph 119, the following paragraph shall be substituted, namely:- 119 In deciding whether a particular accounting policy should be disclosed, management considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in reported financial performance and financial position. Each entity considers the nature of its operations and the policies that the users of its financial statements wo u l d expect to be disclosed for that type of entity. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in Ind ASs. An example is disclosure of a regular way purchase or sale of financial assets using either trade date accounting or settlement date accounting (see Ind AS 109, Financial Instruments). Some Ind Ass specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow. For example, Ind AS 16 requires disclosure of the measurement bases used for classes of proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supervisory personnel, and attributable overheads. Labour and other costs relating to sales and general administrative personnel are not included but are recognised as expenses in the period in which they are incurred. The cost of inventories of a service provider does not include profit margins or non-attributable overheads that are often factored into prices charged by service providers. ; (iv) for paragraph 29, the following paragraph shall be substituted, namely:- 29. Inventories are usually written down to net realisable value item by item. In some circumstances, however, it may be appropriate to group similar or related items. This may be the case with items of inventory relating to the same product line that have similar purposes or end uses, are produced and marketed in the same geographical area, and cannot be practicably evaluated separately from other items in that product line. It is not appropriate to write inventories down on the basis of a classification of inventory, for example, finished goods, or all the inventories in a particular operating segment. Service providers generally accumulate costs in respect of each service for which a separate selling price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing terms are used in this Standard with the meanings specified: A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. A fixed price contract is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output, which in some cases is subject to cost escalation clauses. A cost plus contract is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee. 4. A construction contract may be negotiated for the construction of a single asset such as a bridge, building, dam, pipeline, road, ship or tunnel. A construction contract may also deal with the construction of a number of assets which are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use; examples of such contracts include those for the construction of refineries and other complex pieces of plant or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of the additional asset shall be treated as a separate construction contract when: (a) the asset differs significantly in design, technology or function from the asset or assets covered by the original contract; or (b) the price of the asset is negotiated without regard to the original contract price. Contract revenue 11. Contract revenue shall comprise: (a) the initial amount of revenue agreed in the contract; and (b) variations in contract work, claims and incentive payments: (i) to the extent that it is probable that they will result in revenue; and (ii) they are capable of being reliably measured. 12. Contract revenue is measured at the fair value of the consideration received or receivable. The measurement of contract revenue is affected by a variety of uncertainties that depend on the outcome of future events. The estimates often need to be revised as events occur and uncertainties are resolved. Therefore, the amount of contract revenue may increase or decrease from one period to the next. For example: (a) a contractor and a customer may agree variations or claims that increase or decrease contract revenue in a period subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osts that are attributable to contract activity in general and can be allocated to the contract; and (c) such other costs as are specifically chargeable to the customer under the terms of the contract. 17. Costs that relate directly to a specific contract include: (a) site labour costs, including site supervision; (b) costs of materials used in construction; (c) depreciation of plant and equipment used on the contract; (d) costs of moving plant, equipment and materials to and from the contract site; (e) costs of hiring plant and equipment; (f) costs of design and technical assistance that is directly related to the contract; (g) the estimated costs of rectification and guarantee work, including expected warranty costs; and (h) claims from third parties. These costs may be reduced by any incidental income that is not included in contract revenue, for example income from the sale of surplus materials and the disposal of plant and equipment at the end of the contract. 18. Costs that may be attributable to contract activity in general and can be allocated to specific contracts include: (a) insurance; (b) costs of design and technical assista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: (a) total contract revenue can be measured reliably; (b) it is probable that the economic benefits associated with the contract will flow to the entity; (c) both the contract costs to complete the contract and the stage of contract completion at the end of the reporting period can be measured reliably; and (d) the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates. 24. In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: (a) it is probable that the economic benefits associated with the contract will flow to the entity; and (b) the contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and measured reliably. 25. The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the perce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in a variety of ways. The entity uses the method that measures reliably the work performed. Depending on the nature of the contract, the methods may include: (a) the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs; (b) surveys of work performed; or (c) completion of a physical proportion of the contract work. Progress payments and advances received from customers often do not reflect the work performed. 31. When the stage of completion is determined by reference to the contract costs incurred to date, only those contract costs that reflect work performed are included in costs incurred to date. Examples of contract costs which are excluded are: (a) contract costs that relate to future activity on the contract, such as costs of materials that have been delivered to a contract site or set aside for use in a contract but not yet installed, used or applied during contract performance, unless the materials have been made specially for the contract; and (b) payments made to subcontractors in advance of work performed under the subcontract. 32. When the outcome of a construction contract cannot be est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective of: (a) whether work has commenced on the contract; (b) the stage of completion of contract activity; or (c) the amount of profits expected to arise on other contracts which are not treated as a single construction contract in accordance with paragraph 9. Changes in estimates 38. The percentage of completion method is applied on a cumulative basis in each accounting period to the current estimates of contract revenue and contract costs. Therefore, the effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate (see Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors). The changed estimates are used in the determination of the amount of revenue and expenses recognised in profit or loss in the period in which the change is made and in subsequent periods. Disclosure 39. An entity shall disclose: (a) the amount of contract revenue recognised as revenue in the period; (b) the methods used to determine the contract revenue recognised in the period; and (c) the methods used to determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troduced contractual service arrangements to attract private sector participation in the development, financing, operation and maintenance of such infrastructure. The infrastructure may already exist, or may be constructed during the period of the service arrangement. An arrangement within the scope of this Appendix typically involves a private sector entity (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 build-operate-transfer , a rehabilitate-operate-transfer or a public-to-private service concession arrangement. 3 A feature of these service arrangements is the public service nature of the obligation undertaken by the operator. Public policy is for the services related to the infrastructure to be provided to the public, irrespective o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and equipment by the operator before entering the service arrangement. The derecognition requirements of Indian Accounting Standards (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 measuring the obligations and related rights in service concession arrangements. Requirements for disclosing information about service concession arrangements are in Appendix B to this Indian Accounting Standard. The issues addressed in this Appendix are: (a) treatment of the operator s rights over the infrastructure; (b) recognition and measurement of arrangement consideration; (c) construction or upgrade services; (d) operation services; (e) borrowing costs; (f) subsequent accounting treatment 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 contractu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the public service and specified or determinable amounts, even if payment is contingent on the operator ensuring that the infrastructure meets specified quality or efficiency requirements. 17 The operator shall recognise an intangible asset to the extent that it receives a right (a licence) to charge users of the public service. A right to charge users of the public service is not an unconditional right to receive cash because the amounts are contingent on the extent that the public uses the service. 18 If the operator is paid for the construction services partly by a financial asset and partly by an intangible asset it is necessary to account separately for each component of the operator s consideration. The consideration received or receivable for both components shall be recognised initially at the fair value of the consideration received or receivable. 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. Operation services 20 The operator shall account for revenue and costs relating to operation services in accordance with Ind AS 18. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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. They are recognised as assets of the operator, measured at fair value on initial recognition. The operator shall recognise a liability in respect of unfulfilled obligations it has assumed in exchange for the assets. Application Guidance on Appendix A This Application Guidance is an integral part of Appendix A Scope (paragraph 5 of Appendix A) AG1 Paragraph 5 of Appendix A specifies that infrastructure is within the scope of the Appendix when the following conditions apply: (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. AG2 The control or regulation referred to in condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be considered as a whole. Thus condition (b) is met for the whole of the infrastructure, including the part that is replaced, if the grantor controls any significant residual interest in the final replacement of that part. AG7 Sometimes the use of infrastructure is partly regulated in the manner described in paragraph 5(a) of Appendix A and partly unregulated. However, these arrangements take a variety of forms: (a) any infrastructure that is physically 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 exist, because in cases in which the grantor controls the services in the manner described in paragraph 5 of Appendix A, the existence of ancillary activities does not detract from the grantor s control of the infrastructure. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ind AS 16 Appendix B Service Concession Arrangements: Disclosures This Appendix is an integral part of Indian Accounting Standard (Ind AS) 11. Issues 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 water treatment and supply facilities, motorways, car parks, tunnels, bridges, airports and telecommunication networks. Examples of arrangements that are not service concession arrangements include an entity outsourcing the operation of its internal services (eg employee cafeteria, building maintenance, and accounting or information technology functions). 2. A service concession arrangement generally involves the grantor conveying for the period of the concession to the operator: (a) the right to provide 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclose the amount of revenue and profits or losses recognized in the period on exchanging construction services for a financial asset or an intangible asset. 7 The disclosures required in accordance with paragraph 6 of this Appendix shall be provided individually for each service concession arrangement or in aggregate for each class of service concession arrangements. A class is a grouping of service concession arrangements involving services of a similar nature (eg toll collections, telecommunications and water treatment services). Appendix C References to matters contained in other Indian Accounting Standards This Appendix is an integral part of Indian Accounting Standard (Ind AS) 11. This appendix lists the appendices which are part of other Indian Accounting Standards and makes reference to Ind AS 11, Construction Contracts. 1. Appendix A Intangible Assets-Web Site Costs contained in Ind AS 38, Intangible Assets. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 11 and the corresponding Internatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y course of business are transferred to inventories. ; (ii) for paragraph 69, the following paragraph shall be substituted, namely:- 69 The disposal of an item of property, plant and equipment may occur in a variety of ways (eg by sale, by entering into a finance lease or by donation). In determining the date of disposal of an item, an entity applies the criteria in Ind AS 18 for recognising revenue from the sale of goods. Ind AS 17 applies to disposal by a sale and leaseback. ; (iii) for paragraph 72, the following paragraph shall be substituted, namely:- 72 The consideration receivable on disposal of an item of property, plant and equipment is recognised initially at its fair value. If payment for the item is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield on the receivable. ; (iv) in Appendix C, (a) for paragraph 1, the following paragraph shall be substituted, namely:- 1 Appendix A, Service Concession Arrangements containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. Income encompasses both revenue and gains. Revenue is income that arises in the course of ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends and royalties. The objective of this Standard is to prescribe the accounting treatment of revenue arising from certain types of transactions and events. The primary issue in accounting for revenue is determining when to recognise revenue. Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be met and, therefore, revenue will be recognised. It also provides practical guidance on the application of these criteria. Scope 1 This Stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial liabilities or their disposal (see Ind AS 109 Financial Instruments); (e) changes in the value of other current assets; (f) initial recognition and from changes in the fair value of biological assets related to agricultural activity (see Ind AS 41 Agriculture); (g) initial recognition of agricultural produce (see Ind AS 41); and (h) the extraction of mineral ores. Definitions 7 The following terms are used in this Standard with the meanings specified: Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.(See Ind AS 113, Fair Value Measurement) 8 Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly basis in a particular location. When goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. The revenue is measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents transferred. Identification of the transaction 13 The recognition criteria in this Standard are usually applied separately to each transaction. However, in certain circumstances, it is necessary to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction. For example, when the selling price of a product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as revenue over the period during which the service is performed. Conversely, the recognition criteria are applied to two or more transactions t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se for a reason specified in the sales contract and the entity is uncertain about the probability of return. 17 If an entity retains only an insignificant risk of ownership, the transaction is a sale and revenue is recognised. For example, a seller may retain the legal title to the goods solely to protect the collectability of the amount due. In such a case, if the entity has transferred the significant risks and rewards of ownership, the transaction is a sale and revenue is recognised. Another example of an entity retaining only an insignificant risk of ownership may be a retail sale when a refund is offered if the customer is not satisfied. Revenue in such cases is recognised at the time of sale provided the seller can reliably estimate future returns and recognises a liability for returns based on previous experience and other relevant factors. 18 Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. In some cases, this may not be probable until the consideration is received or until an uncertainty is removed. For example, it may be uncertain that a foreign governmental authority will grant permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted expenses for a transaction involving the rendering of services. 22 Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. However, when an uncertainty arises about the collectability of an amount already included in revenue, the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an expense, rather than as an adjustment of the amount of revenue originally recognised. 23 An entity is generally able to make reliable estimates after it has agreed to the following with the other parties to the transaction: (a) each party s enforceable rights regarding the service to be provided and received by the parties; (b) the consideration to be exchanged; and (c) the manner and terms of settlement. It is also usually necessary for the entity to have an effective internal financial budgeting and reporting system. The entity reviews and, when necessary, revises the estimates of revenue as the service is performed. The need for such revisions does not necessarily indicate that the outcome of the transaction cannot be estimated reliably. 24 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bases set out in paragraph 30 when: (a) it is probable that the economic benefits associated with the transaction will flow to the entity; and (b) the amount of the revenue can be measured reliably. 30 Revenue shall be recognised on the following bases: (a) interest shall be recognised using the effective interest method as set out in Ind AS109; and (b) royalties shall be recognised on an accrual basis in accordance with the substance of the relevant agreement. (c) Omitted* 31 Omitted* 32 Omitted* 33 Royalties accrue in accordance with the terms of the relevant agreement and are usually recognised on that basis unless, having regard to the substance of the agreement, it is more appropriate to recognise revenue on some other systematic and rational basis. 34 Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. However, when an uncertainty arises about the collectibility of an amount already included in revenue, the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an expense, rather than as an adjustmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly at the fair value of advertising services received. However, a Seller can reliably measure revenue at the fair value of the advertising services it provides in a barter transaction, by reference only to non-barter transactions that: (a) involve advertising similar to the advertising in the barter transaction; (b) occur frequently; (c) represent a predominant number of transactions and amount when compared to all transactions to provide advertising that is similar to the advertising in the barter transaction; (d) involve cash and/or another form of consideration (eg marketable securities, non-monetary assets, and other services) that has a reliably measurable fair value; and (e) do not involve the same counterparty as in the barter transaction. Appendix B Customer Loyalty Programmes Background 1 Customer loyalty programmes are used by entities to provide customers with incentives to buy their goods or services. If a customer buys goods or services, the entity grants the customer award credits (often described as points ). The customer can redeem the award credits for awards such as free or discounted goods or services. 2 The programmes operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dits are redeemed and it fulfils its obligations to supply awards. The amount of revenue recognised shall be based on the number of award credits that have been redeemed in exchange for awards, relative to the total number expected to be redeemed. 8 If a third party supplies the awards, the entity shall assess whether it is collecting the consideration allocated to the award credits on its own account (ie as the principal in the transaction) or on behalf of the third party (ie as an agent for the third party). (a) If the entity is collecting the consideration on behalf of the third party, it shall: (i) measure its revenue as the net amount retained on its own account, ie the difference between the consideration allocated to the award credits and the amount payable to the third party for supplying the awards; and (ii) recognise this net amount as revenue when the third party becomes obliged to supply the awards and entitled to receive consideration for doing so. These events may occur as soon as the award credits are granted. Alternatively, if the customer can choose to claim awards from either the entity or a third party, these events may occur only when the customer ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the amount it pays the third party, adding a reasonable profit margin. Judgement is required to select and apply the valuation technique that satisfies the requirements of paragraph 6 of Appendix B and is most appropriate in the circumstances. Appendix C Transfers of Assets from Customers Background 1 In the utilities industry, an entity may receive from its customers items of property, plant and equipment that must be used to connect those customers to a network and provide them with ongoing access to a supply of commodities such as electricity, gas or water. Alternatively, an entity may receive cash from customers for the acquisition or construction of such items of property, plant and equipment. Typically, customers are required to pay additional amounts for the purchase of goods or services based on usage. 2 Transfers of assets from customers may also occur in industries other than utilities. For example, an entity outsourcing its information technology functions may transfer its existing items of property, plant and equipment to the outsourcing provider. 3 In some cases, the transferor of the asset may not be the entity that will eventually have ongoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefits are expected to flow to the entity. In most circumstances, the entity obtains the right of ownership of the transferred item of property, plant and equipment. However, in determining whether an asset exists, the right of ownership is not essential. Therefore, if the customer continues to control the transferred item, the asset definition would not be met despite a transfer of ownership. 10 An entity that controls an asset can generally deal with that asset as it pleases. For example, the entity can exchange that asset for other assets, employ it to produce goods or services, charge a price for others to use it, use it to settle liabilities, hold it, or distribute it to owners. The entity that receives from a customer a transfer of an item of property, plant and equipment shall consider all relevant facts and circumstances when assessing control of the transferred item. For example, although the entity must use the transferred item of property, plant and equipment to provide one or more services to the customer, it may have the ability to decide how the transferred item of property, plant and equipment is operated and maintained and when it is replaced. In this case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that indicates that the obligation to provide the customer with ongoing access to a supply of goods or services arises from the terms of the entity s operating licence or other regulation rather than from the agreement relating to the transfer of an item of property, plant and equipment is that customers that make a transfer pay the same price as those that do not for the ongoing access, or for the goods or services, or for both. Revenue recognition 18 If only one service is identified, the entity shall recognise revenue when the service is performed in accordance with paragraph 20 of Ind AS 18. If such a service is ongoing, revenue shall be recognised in accordance with paragraph 20 of this Appendix. 19 If more than one separately identifiable service is identified, paragraph 13 of Ind AS 18 requires the fair value of the total consideration received or receivable for the agreement to be allocated to each service and the recognition criteria of Ind AS 18 are then applied to each service. 20 If an ongoing service is identified as part of the agreement, the period over which revenue shall be recognised for that service is generally determined by the terms of the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribes that construction of real estate should be treated as sale of goods and revenue should be recognised when the entity has transferred significant risks and rewards of ownership and retained neither continuing managerial involvement nor effective control. IFRIC 15 has not been included in Ind AS 18. Instead, a footnote has been given specifying that the Guidance Note on the subject being issued by the Institute of Chartered Accountants of India shall be followed. 3. Paragraph 2 of IAS 18 which states that IAS 18 supersedes the earlier version IAS 18 is deleted in Ind AS 18 as this is not relevant in Ind AS 18. However, paragraph number 2 is retained in Ind AS 18 to maintain consistency with paragraph numbers of IAS 18. 4. Paragraph number 31 appear as Deleted in IAS 18. In order to maintain consistency with paragraph numbers of IAS 18, the paragraph number is retained in Ind AS 18. 5. Paragraph 30(c), 32, 35 b(iii), 35b(v) appear as Deleted in Ind AS 18 which addresses revenue in form of interest and dividend. The recognition, measurement of dividend is given in Ind AS 109, whereas the measurement of interest is given in Ind AS 109. 6. Paragraph 1A is inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 28 , - (i) in paragraph 17, for item (d), the following item shall be substituted, namely:- (d) The ultimate or any intermediate parent of the entity produces financial statements available for public use that comply with Ind ASs, in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with Ind AS 110. ; (ii) for paragraph 27, the following paragraph shall be substituted, namely:- 27 A group s share in an associate or a joint venture is the aggregate of the holdings in that associate or joint venture by the parent and its subsidiaries. The holdings of the group s other associates or joint ventures are ignored for this purpose. When an associate or a joint venture has subsidiaries, associates or joint ventures, the profit or loss, other comprehensive income and net assets taken into account in applying the equity method are those recognised in the associate s or joint venture s financial statements (including the associate s or joint venture s share of the profit or loss, other comprehensive income and net assets of its associates and joint v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss from the impairment of financial assets, property, plant and equipment, intangible assets, or other assets, and the reversal of such an impairment loss; ; (iii) in paragraph 16A, for the opening paragraph, starting with In addition to and ending with year-to-date basis. , the following paragraph shall be substituted, namely:- 16A In addition to disclosing significant events and transactions in accordance with paragraphs 15 15C, an entity shall include the following information, in the notes to its interim financial statements or elsewhere in the interim financial report. The following disclosures shall be given either in the interim financial statements or incorporated by cross-reference from the interim financial statements to some other statement (such as management commentary or risk report) that is available to users of the financial statements on the same terms as the interim financial statements and at the same time. If users of the financial statements do not have access to the information incorporated by cross-reference on the same terms and at the same time, the interim financial report is incomplete. The information shall normally be reported on a financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Concession Arrangements: Disclosures, contained in Ind AS 11, Construction Contracts. ; (iv) in Appendix 1, for paragraph 3, the following paragraph shall be substituted, namely:- 3. The following paragraph numbers appear as Deleted in IAS 37. In order to maintain consistency with paragraph numbers of IAS 37, the paragraph numbers are retained in Ind AS 37 : (i) paragraph 1(b) (ii) paragraph 4 . 28. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 38 , (i) in paragraph 3, for item (a), the following item shall be substituted, namely:- (a) intangible assets held by an entity for sale in the ordinary course of business (see Ind AS 2, Inventories, and Ind AS 11, Construction Contracts). ; (ii) in paragraph 3, item (i) shall be omitted. (iii) for paragraph 114, the following paragraph shall be substituted, namely:- 114 The disposal of an intangible asset may occur in a variety of ways (eg by sale, by entering into a finance lease, or by donation). In determining the date of disposal of such an asset, an entity applies the criteria in Ind AS 18, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved by sale or by entering into a finance lease. In determining the date of disposal for investment property, an entity applies the criteria in Ind AS 18 for recognising revenue from the sale of goods. Ind AS 17 applies to a disposal effected by entering into a finance lease and to a sale and leaseback. ; (iv) for paragraph 70, the following paragraph shall be substituted, namely:- 70 The consideration receivable on disposal of an investment property is recognised initially at fair value. In particular, if payment for an investment property is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 using the effective interest method. ; (v) in Appendix 1, in paragraph 7, item (i) shall be omitted. [F. No. 01/01/2009-CL-V(Part)] AMARDEEP SINGH BHATIA, Jt. Secy. * Refer Appendix 1 1 This term (as defined in Ind AS107) is used in the requirements for presenting the effects of changes in credit risk on liabilities designated as at fair value through profit or lo ..... 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