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Companies (Indian Accounting Standards) (Amendment) Rules 2016

Companies Law - [F. No. 01/01/2009-CL-V(Part) - Dated:- 30-3-2016 - MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, the 30th March, 2016 G.S.R. 365 (E).-In exercise of the powers conferred by section 133 read with section 469 of the Companies Act, 2013 (18 of 2013) and sub-section (1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the National Advisory Committee on Accounting Standards, hereby makes the following rules to amend the Comp .....

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ined 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 .....

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amely:- (a) The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods beginning on or after the 1st April, 2018, with comparatives for the periods ending on 31st March, 2018, or thereafter- (A) NBFCs having net worth of rupees five hundred crore or more; (B) holding, subsidiary, joint venture or associate companies of companies covered under item (A), other than those already covered under clauses (i), (ii) and (iii) of sub-rule (1) of rule 4. (b) The .....

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or more but less than rupees five hundred crore; and (C) holding, subsidiary, joint venture or associate companies of companies covered under item (A) or item (B) of sub-clause (b), other than those already covered in clauses (i), (ii) and (iii) of sub-rule (1) or item (B) of sub-clause (a) of clause (iv). Explanation.- For the purposes of clause (iv), if in a group of Companies, some entities apply Accounting Standards specified in the Annexure to the Companies (Accounting Standards) Rules, 200 .....

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ure to the Companies (Accounting Standards) Rules, 2006, and its subsidiaries, associates and joint ventures, if covered by clause (i), (ii) and (iii) of sub-rule (1) 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); (ii) where a parent is a company covered under clause (i), (ii) and (iii) of sub-rule (1) and has an NBFC subsidiary, .....

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rcial 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) .....

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31st March, 2016, the net worth shall be calculated on the basis of the first audited stand-alone financial statements ending after that date, in respect of which it meets the thresholds. Explanation.- For the purposes of sub-clause (b), the NBFCs meeting the specified thresholds given in subclause (b) of clause (iv) of sub-rule (1) for the first time at the end of an accounting year shall apply Indian Accounting Standards (Ind ASs) from the immediate next accounting year in the manner specified .....

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ing on 1stApril, 2016 the words, figures and letters or 1stApril, 2018, as the case may be shall be inserted; (b) after the words, figures and letters effective for the financial year ending on 31st March, 2017 the words, figures and letters or 31st March, 2019, as the case may be , shall be inserted; (V) in the proviso to sub-rule (5), sub-rule (6) and sub-rule (9), the words either voluntarily or mandatorily shall be omitted. 4. for rule 5, the following rule shall be substituted, namely:- (5) .....

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principal rules, in the Annexure , 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 .....

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ragraphs 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); and (ii) the criteria in Ind AS 38 for revaluation (including the existence of an active market). An entity shall not use these elections for other assets or for liabilities. ; (c) in the opening paragraph of paragraph D22, starting with A first-time and ending with Ind AS 115 and its heading, the following heading .....

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18 prospectively to transfers of assets from customers received on or after the transition date. Earlier application is permitted provided the valuations and other information needed to apply the Appendix to past transfers were obtained at the time those transfers occurred. An entity shall disclose the date from which the Appendix D of Ind AS 18 was applied. ; (iii) In Appendix 1,- (a) for paragraph 10, the following paragraph shall be substituted namely:- 10. IFRS 9 Financial Instruments is ef .....

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shall be inserted namely;- 13. IAS 40, Investment Property permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition. Ind AS 40, Investment Property permits only the cost model. As a consequence, paragraph 30 is amended and paragraph D7 (a) is deleted. 14. Paragraphs D34-D35 deal with Ind AS 115, Revenue from Contracts with Customers. As Ind AS 115 is not yet effective, therefore, these paragraphs have not been inc .....

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nt 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 .....

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ample, some licence fees, royalties, contingent lease payments and similar items), as well as a lessee s residual value guarantee embedded in a finance lease (see Ind AS 17, Leases, Ind AS 18, Revenue, and Ind AS 38, Intangible Assets). ; (iii) in Appendix B,- (a) in paragraph B7, for item (b), the following item shall be substituted, namely:- (b) If Ind AS 18, Revenue applied, the service provider would recognise revenue by reference to the stage of completion (and subject to other specified cr .....

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r retailer are within the scope of this Ind AS. However, product warranties issued directly by a manufacturer, dealer or retailer are outside its scope, because they are within the scope of Ind AS 18 and Ind AS 37. ; (c) for paragraph B21, the following paragraph shall be substituted, namely:- B21 If the contracts described in paragraph B19 do not create financial assets or financial liabilities, Ind AS 18 applies. Under Ind AS 18, revenue associated with a transaction involving the rendering of .....

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ied an 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 p .....

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ication, 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 the requirements in paragraph 15 (if reclassified as held for sale) or 15A (if reclassified as held for distribution to owners) and recognise any reduction or increase in the fair value less costs to sell/costs to distribute of the non-current asset (or disposal group) by following the requirements in paragra .....

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ncluded in a disposal group classified as held for sale or as held for distribution to owners) at the lower of: (a) its carrying amount before the asset (or disposal group) was classified as held for sale or as held for distribution to owners, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset (or disposal group) not been classified as held for sale or as held for distribution to owners, and (b) its recoverable amount at the date of the subs .....

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tion as held for sale or as held for distribution to owners shall be amended accordingly if the disposal group or non-current asset that ceases to be classified as held for sale or as held for distribution to owners is a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate. The entity shall present that adjustment in the same caption in the statement of profit and loss used to present a gain or loss, if any, recognised in accordanc .....

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e 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 as .....

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lowing paragraph shall be substituted, namely:- 5A The credit risk disclosure requirements in paragraph 35A-35N apply to those rights that Ind AS 18, Revenue specifies are accounted for in accordance with Ind AS 109 for the purposes of recognising impairment gains or losses. Any reference to financial assets or financial instruments in these paragraphs shall include those rights unless otherwise specified ; (ii) for paragraph 21, the following paragraph shall be substituted, namely:- 21 In accor .....

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shall be substituted, namely:- B5 Paragraph 21 requires disclosure of the measurement basis (or bases) used in preparing the financial statements and the other accounting policies used that are relevant to an understanding of the financial statements. For financial instruments, such disclosure may include: ; (b) in paragraph B5, for the last paragraph starting with Paragraph 122 of and ending with in the financial statements. the following paragraph shall be substituted, namely:- Paragraph 122 o .....

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nancial asset if, as part of the transfer, it neither retains any of the contractual rights 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 th .....

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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 transferred financial asset for the purposes of the disclosure requirements if the servicing fee is dependent on the amount or timing of the cash flows collected from the transferred financial asset. Similarly, a servicer has .....

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substituted, namely:- 2. Appendix A, Service Concession Arrangements, contained in Ind AS 11, Construction Contracts. . 10. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 109 , (i) in paragraph 2.1, for item (j), the following item shall be substituted, namely:- (j) rights and obligations within the scope of Ind AS 11, Construction Contracts, and Ind AS 18, Revenue, that are financial instruments, exce .....

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be substituted, namely:- (ii) the amount initially recognised (see paragraph 5.1.1) less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18. ; (iv) in paragraph 4.2.1, in item (d), for sub-item(ii), the following sub-item shall be substituted, namely:- (ii) the amount initially recognised (see paragraph 5.1.1) less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18. ; (v) for para .....

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g 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 an .....

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credit losses. That accounting policy shall be applied to all lease receivables but may be applied separately to finance and operating lease receivables. ; (ix) in Appendix A,- (a) the definition of contract assets shall be omitted. (b) for the last paragraph, the following paragraph shall be substituted, namely:- The following terms are defined in paragraph 11 of Ind AS 32, Appendix A of Ind AS 107 or Appendix A of Ind AS 113 and are used in this Standard with the meanings specified in Ind AS .....

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following sub-item shall be substituted, namely:- (ii) the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with Ind AS 18 (see paragraph 4.2.1(c)). ; (c) in paragraph B2.5, for item (c), the following item shall be substituted, namely:- (c) If a financial guarantee contract was issued in connection with the sale of goods, the issuer applies Ind AS 18 in determining when it recognises the revenue from the guarantee and from the sale of .....

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be required to repay ( the guarantee amount ). The associated liability is initially 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 .....

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n 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 Arrangements contained in Ind AS 11, Construction Contracts. ; (xii) in Appendix 1, after paragraph 2, the following paragraph shall be inserted namely:- 3. Following paragraphs deal with Ind AS 115, Revenue from Contracts with Customers. As Ind AS 115 .....

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be substituted, namely:- (iv) its ultimate or any intermediate parent produces financial statements that are available for public use and comply with Ind ASs, in which subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with this Ind AS. ; (ii) in paragraph 4, item (b), shall be omitted*; (iii) in paragraph 4, item (c), shall be omitted*; (iv) after paragraph 4, the following paragraphs shall be inserted, namely:- 4A This Ind AS does not apply to post .....

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ntity has a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services that relate to the investment entity s investment activities (see paragraphs B85C-B85E), it shall consolidate that subsidiary in accordance with paragraphs 19-26 of this Ind AS and apply the requirements of Ind AS 103 to the acquisition of any such subsidiary. ; (vi) In Appendix B,- (a) for paragraph B85C, the following paragraph shall be substituted, namely:- B85C An inves .....

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bsidiary 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 .....

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(Ind AS) , in Indian Accounting Standard (Ind AS) 112 , in paragraph 6, for item (b), the following item shall be substituted, namely:- (b) an entity s separate financial statements to which Ind AS 27, Separate Financial Statements, applies. However: (i) if an entity has interests in unconsolidated structured entities and prepares separate financial statements as its only financial statements, it shall apply the requirements in paragraphs 24-31 when preparing those separate financial statements. .....

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heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 1 , (i) in paragraph 10, for following item(e), the following item shall be substituted namely:- (e) notes, comprising significant accounting policies and other explanatory information; ; (ii) after paragraph 30, following paragraph shall be inserted, namely:- 30A When applying this and other Ind ASs an entity shall decide, taking into consideration all relevant facts and circumstances, how it aggregates inf .....

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rovide a specific disclosure required by an Ind AS if the information resulting from that 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 transactio .....

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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 transaction. For example: (a) an entity presents gains and losses on the disposal of non-current assets, including investments and operating assets, by deducting from the proceeds on disposal the carrying amount of the asse .....

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bstituted, namely:- 54 The balance sheet shall include line items that present the following amounts: ; (vi) for paragraph 55, the following paragraph shall be substituted, namely:- 55 An entity shall present additional line items (including by disaggregating the line items listed in paragraph 54), headings and subtotals in the balance sheet when such presentation is relevant to an understanding of the entity s financial position. ; (vii) after paragraph 55, the following paragraph shall be inse .....

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S for the balance sheet. ; (viii) for paragraph 82A, the following paragraph shall be substituted, namely:- 82A The other comprehensive income section shall present line items for the amounts for the period of: (a) items of other comprehensive income (excluding amounts in paragraph (b)), classified by nature and grouped into those 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 .....

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e 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 .....

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als or totals required in Ind AS for such statement. ; (xi) for paragraph 113, the following paragraph shall be substituted, namely:- 113 An entity shall present notes in a systematic manner. In determining a systematic manner, the entity shall consider the effect on the understandability and comparability of its financial statements. An entity shall cross-reference each item in the balance sheet and in the statement of profit and loss, and in the statements of changes in equity and of cash flow .....

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imilarly such as assets measured at fair value; or (c) following the order of the line items in the statement of profit and loss and the balance sheet, such as: (i) statement of compliance with Ind ASs (see paragraph 16); (ii) significant accounting policies applied (see paragraph 117); (iii) supporting information for items presented in the balance sheet and in the statement of profit and loss, and in the statements of changes in equity and of cash flows, in the order in which each statement an .....

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or bases) used in preparing the financial statements; and (b) the other accounting 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 finan .....

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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 property, plant and equipment. ; (xvi) paragraph 120 shall be omitted*; (xvii) for paragraph 122, the following shall be substituted, namely:- 122 An entity shall disclose, along with its significant accounting policies or other notes, the ju .....

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ined in Ind AS 1. (i) paragraph 12 (ii) paragraphs 39-40 (iii) paragraph 81 (iv) paragraph 82(e) (v) paragraphs 82(f)-(i) (vi) paragraphs 83-84 (vii) paragraph 106(c) (viii) paragraph 123(a) (ix) paragraph 115 (x) paragraph 120 ; 15. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 2 , - (i) in paragraph 2, for item (a), the following item shall be substituted, namely:- (a) work in progress arising under .....

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nd supplies awaiting use in the production process. In the case of a service provider, inventories include the costs of the service, as described in paragraph 19, for which the entity has not yet recognised the related revenue (see Ind AS 18, Revenue). ; (iii) for paragraph 19, the following paragraph shall be substituted, namely:- 19. To the extent that service providers have inventories, they measure them at the costs of their production. These costs consist primarily of the labour and other c .....

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ng 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 w .....

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ories and the extent of the changes in these assets is useful to financial statement users. Common classifications of inventories are merchandise, production supplies, materials, work in progress and finished goods. The inventories of a service provider may be described as work in progress. ; (vi) in Appendix 1, paragraph 2 shall be omitted. 16. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , after Indian Accounting Standard (Ind AS) 10, the .....

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ion contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different accounting periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the accounting periods in which construction work is performed. This Standard uses the recognition criteria established in the Framework for the Preparation and Presentation of Financial Statements issued by .....

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ll be dealt in accordance with Ind AS 109, Financial Instruments. 2. * Definitions 3. The following 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 .....

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ion 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 equipment. 5. For the purposes of this Standard, construction contracts include: (a) contracts for the rendering of services which are directly related to the construction of the asset, for example, those for the services of pro .....

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th an agreed maximum price. In such circumstances, a contractor needs to consider all the conditions in paragraphs 23 and 24 in order to determine when to recognise contract revenue and expenses. Combining and segmenting construction contracts 7. The requirements of this Standard are usually applied separately to each construction contract. However, in certain circumstances, it is necessary to apply the Standard to the separately identifiable components of a single contract or to a group of cont .....

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can be identified. 9. A group of contracts, whether with a single customer or with several customers, shall be treated as a single construction contract when: (a) the group of contracts is negotiated as a single package; (b) the contracts are so closely interrelated that they are, in effect, part of a single project with an overall profit margin; and (c) the contracts are performed concurrently or in a continuous sequence. 10. A contract may provide for the construction of an additional asset a .....

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evenue 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 a .....

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lties arising from delays caused by the contractor in the completion of the contract; or (d) when a fixed price contract involves a fixed price per unit of output, contract revenue increases as the number of units is increased. 13. A variation is an instruction by the customer for a change in the scope of the work to be performed under the contract. A variation may lead to an increase or a decrease in contract revenue. Examples of variations are changes in the specifications or design of the ass .....

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in specifications or design, and disputed variations in contract work. The measurement of the amounts of revenue arising from claims is subject to a high level of uncertainty and often depends on the outcome of negotiations. Therefore, claims are included in contract revenue only when: (a) negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and (b) the amount that it is probable will be accepted by the customer can be measured reliably. 1 .....

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act costs 16. Contract costs shall comprise: (a) costs that relate directly to the specific contract; (b) costs 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 eq .....

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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 assistance that are not directly related to a specific contract; and (c) construction overheads. Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. Th .....

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specified in the terms of the contract. 20. Costs that cannot be attributed to contract activity or cannot be allocated to a contract are excluded from the costs of a construction contract. Such costs include: (a) general administration costs for which reimbursement is not specified in the contract; (b) selling costs; (c) research and development costs for which reimbursement is not specified in the contract; and (d) depreciation of idle plant and equipment that is not used on a particular cont .....

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riod in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period. Recognition of contract revenue and expenses 22. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract shall be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period. An expected loss .....

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pletion 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 ent .....

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attributed to the proportion of work completed. This method provides useful information on the extent of contract activity and performance during a period. 26. Under the percentage of completion method, contract revenue is recognised as revenue in profit or loss in the accounting periods in which the work is performed. Contract costs are usually recognised as an expense in profit or loss in the accounting periods in which the work to which they relate is performed. However, any expected excess .....

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be estimated reliably when it is probable that the economic benefits associated with the contract will flow to the entity. However, when an uncertainty arises about the collectibility of an amount already included in contract revenue, and already recognised in profit or loss, 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 contract revenue. 29. An entity is generally able to ma .....

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sions does not necessarily indicate that the outcome of the contract cannot be estimated reliably. 30. The stage of completion of a contract may be determined 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 p .....

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tract 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 estimated reliably: (a) revenue shall be recognised only to the extent of contract costs incurred that it is probable will be recoverable; and (b) contract costs shall be r .....

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cted to be recoverable. As the outcome of the contract cannot be estimated reliably, no profit is recognised. However, even though the outcome of the contract cannot be estimated reliably, it may be probable that total contract costs will exceed total contract revenues. In such cases, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately in accordance with paragraph 36. 34. Contract costs that are not probable of being re .....

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) where the customer is unable to meet its obligations; or (e) where the contractor is unable to complete the contract or otherwise meet its obligations under the contract. 35. When the uncertainties that prevented the outcome of the contract being estimated reliably no longer exist, revenue and expenses associated with the construction contract shall be recognised in accordance with paragraph 22 rather than in accordance with paragraph 32. Recognition of expected losses 36. When it is probable .....

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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 .....

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: (a) the aggregate amount of costs incurred and recognised profits (less recognised losses) to date; (b) the amount of advances received; and (c) the amount of retentions. 41. Retentions are amounts of progress billings that are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified. Progress billings are amounts billed for work performed on a contract whether or not they have been paid by the customer. Advanc .....

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recognised profits (less recognised losses) exceeds progress billings. 44. The gross amount due to customers for contract work is the net amount of: (a) costs incurred plus recognised profits; less (b) the sum of recognised losses and progress billings for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses). 45. An entity discloses any contingent liabilities and contingent assets in accordance with Ind AS 37, Provisions, Co .....

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nstructed, operated and maintained by the public sector and financed through public budget appropriation. 2 In recent times, governments have introduced 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 en .....

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uild-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 of the identity of the party that operates the services. The service arrangement contractually obliges the operator to provide the services to the public on behalf o .....

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operator and regulates price revisions over the period of the service arrangement. (d) the operator is obliged to hand over the infrastructure to the grantor in a specified condition at the end of the period of the arrangement, for little or no incremental consideration, irrespective of which party initially financed it. Scope 4 This Appendix gives guidance on the accounting by operators for public-to-private service concession arrangements 5 This Appendix applies to public-to-private service c .....

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he scope of this Appendix if the conditions in paragraph 5(a) of this Appendix are met. Paragraphs AG1-AG8 of the Application Guidance of this Appendix provide guidance on determining whether, and to what extent, public-to-private service concession arrangements are within the scope of this Appendix. 7 This Appendix applies to both: (a) infrastructure that the operator constructs or acquires from a third party for the purpose of the service arrangement; and (b) existing infrastructure to which t .....

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n 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 ac .....

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ate the infrastructure to provide the public service on behalf of the grantor in accordance with the terms specified in the contract. Recognition and measurement of arrangement consideration 12 Under the terms of contractual arrangements within the scope of this Appendix, the operator acts as a service provider. The operator constructs or upgrades infrastructure (construction or upgrade services) used to provide a public service and operates and maintains that infrastructure (operation services) .....

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eration 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 below. Construction or upgrade services 14 The operator shall account for revenue and costs relating to construction or upgrade services in accordance with this standard. Consideration given by the grantor to the operator 15 If the operator provides construction or upgrade services the consideration received o .....

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erator 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 specified quality or efficiency requirements. 17 The operator shall recognise an intangible asset to the extent that it receives a right (a .....

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e 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. Contractual obligations to restore the infrastructure to a specified level of serviceability 21 The operator ma .....

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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 the operator 22 In accordance with Ind AS 23, borrowing costs attributable to the arrangement shall be recognised as an expense in the period in which they are incurred unless the operator has a contractual right to receive an intangible asset (a right to charge users of the public service). In this case borrowing costs attributable to the arra .....

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the grantor is measured at amortised cost or fair value through other comprehensive income, Ind AS 109 requires interest calculated using the effective interest method to be recognised in profit or loss. Intangible asset 26 Ind AS 38 applies to the intangible asset recognised in accordance with paragraphs 17 and 18 of this Appendix. Paragraphs 45-47 of Ind AS 38 provide guidance on measuring intangible assets acquired in exchange for a non-monetary asset or assets or a combination of monetary a .....

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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 fol .....

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cumstances 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 entity, the public sector as a whole, together with any regulators acting in the public interest, shall be regarded as related to the grantor for the purposes of this Appendix A. AG3 For the purpose of condition (a), the grantor does not n .....

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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 give the grantor a continuing right of use throughout the period of the arrangement. The residual interest in the infrastructure is the estimated current value of the infrastructure as if it were already of the age and in the condition ex .....

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ired (see paragraph 21 of Appendix A), 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 building), the item of infrastructure 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 f .....

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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. AG8 The ope .....

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s to Indian Accounting Standards that apply to typical types of public-to-private arrangements This note accompanies, but is not part of, Appendix A. The table sets out the typical types of arrangements for private sector participation in the provision of public sector services and provides references to Indian Accounting Standards that apply to those arrangements. The list of arrangements types is not exhaustive. The purpose of the table is to highlight the continuum of arrangements. It is not .....

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t Grantor Operator Demand risk Shared Grantor Operator and/or Grantor Operator Typical Duration 8-20 years 1-5 years 25-30 years Indefinite (or may be limited by licence) Residual Interest Grantor Operator Relevant Indian Accounting Standards Ind AS 17 Ind AS 18 This Appendix A 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 .....

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vices (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, or financial assets, in exchange for the operator: (c) committing to provide th .....

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es in the financial statements of an operator and a grantor. 5. Certain aspects and disclosures relating to some service concession arrangements are addressed by Indian Accounting Standards (eg Ind AS 16 applies to acquisitions of items of property, plant 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, .....

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certainty of future cash flows (eg the period of the concession, re-pricing dates and the basis upon which re-pricing or re-negotiation is determined); (c) the nature and extent (eg quantity, time period or amount as appropriate) of: (i) rights to use specified 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 t .....

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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 .....

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Concession Arrangements and SIC 29, Service Concession Arrangements: Disclosures Comparison with IAS 11, Construction Contracts, IFRIC 12, Service Concession Arrangements and SIC 29, Service Concession Arrangements: Disclosures 1. The transitional provisions given in IFRIC 12 have not been given in Ind AS 11, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, Firsttime Adoption of Indian Accounting Standards corresponding to IF .....

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o maintain consistency with paragraph numbers of IAS 11. . 17. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 12 , in paragraph 59, for item (a), the following item shall be substituted namely:- (a) Royalty or dividend revenue is received in arrears and is included in accounting profit on a time apportionment basis in accordance with Ind AS 18, Revenue, or Ind AS 109, Financial Instruments, as relevant, .....

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ies at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 18, Revenue. Ind AS 105 does not apply when assets that are held for sale in the ordinary 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 b .....

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, 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 contained in Ind AS 11, Construction Contracts. ; (b) for paragraph .....

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amely:- 8. The criteria in paragraph 20 of Ind AS 18, Revenue, shall be applied to the facts and circumstances of each arrangement in determining when to recognise a fee as income that an Entity might receive. Factors such as whether there is continuing involvement in the form of significant future performance obligations necessary to earn the fee, whether there are retained risks, the terms of any guarantee arrangements, and the risk of repayment of the fee, shall be considered. Indicators that .....

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Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts. ; (b) for paragraph 2, the following paragraph shall be substituted, namely:- 2 Appendix B, Service Concession Arrangements: Disclosures contained in Ind AS 11, Construction Contracts. ; 20. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , after Indian Accounting Standard (Ind AS) 17, the following Indian Accounting Standard shall be inserted, namely:- .....

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ases 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 p .....

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following transactions and events2: (a) the sale of goods; (b) the rendering of services; and (c) the use by others of entity assets yielding interest and royalties. 1A This Standard deals with recognition of interest. However, the following are dealt in accordance with Ind AS 109, Financial Instruments: (a) measurement of interest charges for the use of cash or cash equivalents or amounts due to the entity; and (b) recognition and measurement of dividend. 1B The impairment of any contractual r .....

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dered within a single period or over more than one period. Some contracts for the rendering of services are directly related to construction contracts, for example, those for the services of project managers and architects. Revenue arising from these contracts is not dealt with in this Standard but is dealt with in accordance with the requirements for construction contracts as specified in Ind AS 11 Construction Contracts. 5 The use by others of entity assets gives rise to revenue in the form of .....

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investments which are accounted for under the equity method (see Ind AS 28 Investments in Associates and Joint Ventures); (c) insurance contracts within the scope of Ind AS 104 Insurance Contracts; (d) changes in the fair value of financial assets and financial 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 .....

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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 are not economic benefits which flow to the entity and do not result in increase .....

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arising on a transaction is usually determined by agreement between the entity and the buyer or user of the asset. It is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the entity. 11 In most cases, the consideration is in the form of cash or cash equivalents and the amount of revenue is the amount of cash or cash equivalents received or receivable. However, when the inflow of cash or cash .....

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nterest. The imputed rate of interest is the more clearly determinable of either: (a) the prevailing rate for a similar instrument of an issuer with a similar credit rating; or (b) a rate of interest that discounts the nominal amount of the instrument to the current cash sales price of the goods or services. The difference between the fair value and the nominal amount of the consideration is recognised as interest revenue in accordance with Ind AS 109. 12 When goods or services are exchanged or .....

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easured 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 .....

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are linked in such a way that the commercial effect cannot be understood without reference to the series of transactions as a whole. For example, an entity may sell goods and, at the same time, enter into a separate agreement to repurchase the goods at a later date, thus negating the substantive effect of the transaction; in such a case, the two transactions are dealt with together. Sale of goods 14 Revenue from the sale of goods shall be recognised when all the following conditions have been s .....

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can be measured reliably. 15 The assessment of when an entity has transferred the significant risks and rewards of ownership to the buyer requires an examination of the circumstances of the transaction. In most cases, the transfer of the risks and rewards of ownership coincides with the transfer of the legal title or the passing of possession to the buyer. This is the case for most retail sales. In other cases, the transfer of risks and rewards of ownership occurs at a different time from the t .....

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ue from a particular sale is contingent on the derivation of revenue by the buyer from its sale of the goods; (c) when the goods are shipped subject to installation and the installation is a significant part of the contract which has not yet been completed by the entity; and (d) when the buyer has the right to rescind the purchase 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 ownersh .....

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es 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 aut .....

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es that relate to the same transaction or other event are recognised simultaneously; this process is commonly referred to as the matching of revenues and expenses. Expenses, including warranties and other costs to be incurred after the shipment of the goods can normally be measured reliably when the other conditions for the recognition of revenue have been satisfied. However, revenue cannot be recognised when the expenses cannot be measured reliably; in such circumstances, any consideration alre .....

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; (b) it is probable that the economic benefits associated with the transaction will flow to the entity; (c) the stage of completion of the transaction at the end of the reporting period can be measured reliably; and (d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.4 21 The recognition of revenue by reference to the stage of completion of a transaction is often referred to as the percentage of completion method. Under this method, reve .....

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ble 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 oth .....

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outcome of the transaction cannot be estimated reliably. 24 The stage of completion of a transaction may be determined by a variety of methods. An entity uses the method that measures reliably the services performed. Depending on the nature of the transaction, the methods may include: (a) surveys of work performed; (b) services performed to date as a percentage of total services to be performed; or (c) the proportion that costs incurred to date bear to the estimated total costs of the transacti .....

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ecified period unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed. 26 When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. 27 During the early stages of a transaction, it .....

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ered, revenue is not recognised and the costs incurred are recognised as an expense. When the uncertainties that prevented the outcome of the contract being estimated reliably no longer exist, revenue is recognised in accordance with paragraph 20 rather than in accordance with paragraph 26. Interest and Royalties 29 Revenue arising from the use by others of entity assets yielding interest and royalties shall be recognised on the bases set out in paragraph 30 when: (a) it is probable that the eco .....

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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 recov .....

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ods; (ii) the rendering of services; and (iii) Omitted* (iv) royalties (v) Omitted * (c) the amount of revenue arising from exchanges of goods or services included in each significant category of revenue. 36 An entity discloses any contingent liabilities and contingent assets in accordance with Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets. Contingent liabilities and contingent assets may arise from items such as warranty costs, claims, penalties or possible losses. Appendi .....

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er cases, equal or approximately equal amounts of cash or other consideration are also exchanged. 3 A Seller that provides advertising services in the course of its ordinary activities recognises revenue under Ind AS 18 from a barter transaction involving advertising when, amongst other criteria, the services exchanged are dissimilar (paragraph 12 of Ind AS 18) and the amount of revenue can be measured reliably (paragraph 20(a) of Ind AS 18.This Appendix only applies to an exchange of dissimilar .....

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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 .....

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free or discounted goods or services. 2 The programmes operate in a variety of ways. Customers may be required to accumulate a specified minimum number or value of award credits before they are able to redeem them. Award credits may be linked to individual purchases or groups of purchases, or to continued custom over a specified period. The entity may operate the customer loyalty programme itself or participate in a programme operated by a third party. The awards offered may include goods or ser .....

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e entity that grants award credits to its customers. Issues 4 The issues addressed in this Appendix are: (a) whether the entity s obligation to provide free or discounted goods or services ( awards ) in the future should be recognised and measured by: (i) allocating some of the consideration received or receivable from the sales transaction to the award credits and deferring the recognition of revenue (applying paragraph 13 of Ind AS 18); or (ii) providing for the estimated future costs of suppl .....

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value of the consideration received or receivable in respect of the initial sale shall be allocated between the award credits and the other components of the sale. 6 The consideration allocated to the award credits shall be measured by reference to their fair value. 7 If the entity supplies the awards itself, it shall recognise the consideration allocated to award credits as revenue when award credits are redeemed and it fulfils its obligations to supply awards. The amount of revenue recognised .....

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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 .....

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n received and receivable for them (ie the consideration allocated to the award credits at the time of the initial sale that has not yet been recognised as revenue plus any further consideration receivable when the customer redeems the award credits), the entity has onerous contracts. A liability shall be recognised for the excess in accordance with Ind AS 37. The need to recognise such a liability could arise if the expected costs of supplying awards increase, for example if the entity revises .....

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re the fair value of award credits by reference to the fair value of the awards for which they could be redeemed. The fair value of the award credits takes into account, as appropriate: (a) the amount of the discounts or incentives that would otherwise be offered to customers who have not earned award credits from an initial sale; (b) the proportion of award credits that are not expected to be redeemed by customers; and (c) non-performance risk. If customers can choose from a range of different .....

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onable 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 electrici .....

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the outsourcing provider. 3 In some cases, the transferor of the asset may not be the entity that will eventually have ongoing access to the supply of goods or services and will be the recipient of those goods or services. However, for convenience this Appendix refers to the entity transferring the asset as the customer. Scope 4 This Appendix applies to the accounting for transfers of items of property, plant and equipment by entities that receive such transfers from their customers. 5 Agreemen .....

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ipment and the entity must then use the item of property, plant and equipment either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services, or to do both. 7 This Appendix does not apply to agreements in which the transfer is either a government grant as defined in Ind AS 20 or infrastructure used in a service concession arrangement that is within the scope of Appendix A of Ind AS 11 Service Concession Arrangements. Issues 8 The Appen .....

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9 When an entity receives from a customer a transfer of an item of property, plant and equipment, it shall assess whether the transferred item meets the definition of an asset set out in the Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India. Paragraph 49(a) of the Framework states that an asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flo .....

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sset 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 cu .....

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erty, plant and equipment in accordance with paragraph 7 of Ind AS 16 and measure its cost on initial recognition at its fair value in accordance with paragraph 24 of that Standard. How should the credit be accounted for? 12 The following discussion assumes that the entity receiving an item of property, plant and equipment has concluded that the transferred item should be recognised and measured in accordance with paragraphs 9-11. 13 Paragraph 12 of Ind AS 18 states that When goods are sold or s .....

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es in exchange for the transferred item of property, plant and equipment, such as connecting the customer to a network, providing the customer with ongoing access to a supply of goods or services, or both. In accordance with paragraph 13 of Ind AS 18, the entity shall identify the separately identifiable services included in the agreement. 15 Features that indicate that connecting the customer to a network is a separately identifiable service include: (a) a service connection is delivered to the .....

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. 17 Conversely, a feature 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 serv .....

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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 agreement with the customer. If the agreement does not specify a period, the revenue shall be recognised over a period no longer than the useful life of the transferred asset used to provide the ongoing service. How should the entity account for a transfer of cash from its customer? 21 When a .....

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recognise revenue in accordance with paragraphs 13-20 at the amount of cash received from the customer. Appendix D References to matters contained in other Indian Accounting Standards This Appendix is an integral part of Indian Accounting Standard 18. This appendix lists the appendices which are part of other Indian Accounting Standards and make reference to Ind AS 18, Revenues 1. Appendix A, Service Concession Arrangements contained in Ind AS 11 Construction Contracts. 2. Appendix B, Evaluating .....

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sfers Of Assets from Customers. Comparison with IAS 18, Revenue, SIC 31, IFRIC 13 and IFRIC 18 1. The transitional provisions given in IAS 18, SIC 13 and IFRIC 13 have not been given in Ind AS 18, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. 2. On the basis of principles of the IA .....

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ountants 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), 3 .....

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AS 109, Financial Instruments. 7. Paragraph 1B is inserted, which prescribes the impairment of any contractual right to receive cash or another financial asset arising from this standard, shall be dealt in accordance with Ind AS 109, Financial Instruments. 21. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 19 , - (i) for paragraph 83, the following paragraph shall be substituted, namely:- 83 The rate u .....

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all be consistent with the currency and estimated term of the post-employment benefit obligations. ; (ii) in Appendix 1, for paragraph 2, the following paragraph shall be substituted, namely:- 2 According to Ind AS 19 the rate to be used to discount post-employment benefit obligation shall be determined by reference to the market yields on government bonds, whereas under IAS 19 , the government bonds can be used only for those currencies where there is no deep market of high quality corporate bo .....

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this Standard also. . 23. In the principal rules, in the Annexure , under the heading B. Indian 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 accorda .....

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aken 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 ventures), after any adjustments necessary to give effect to uniform accounting policies (see paragraphs 35-36A). ; (iii) for paragraph 36, the following paragraph shall be substituted, namely:- 36 Except as described in paragr .....

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uirement in paragraph 36, if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate s or joint venture s interests in subsidiaries. . 24. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indi .....

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r paragraph 1, the following paragraph shall be substituted, namely:- 1. Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts. . 25. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 34 ,- (i) in paragraph 5, for item (e), the following item shall be substituted, namely:- (e) notes, comprising significant accounting policies and other explanatory information; ; (ii) in .....

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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 .....

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(Ind AS) 36 , in paragraph 2, for item (b), the following item shall be substituted namely:- (b) assets arising from construction contracts (see Ind AS 11, Construction Contracts and Ind AS 18, Revenue ); . 27. In the principal rules, in the Annexure , under the heading B. Indian Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 37 , - (i) for paragraph 5, the following paragraph shall be substituted, namely:- 5. When another Standard deals with a specific type of provision, .....

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d AS 19, Employee Benefits); (e) insurance contracts (see Ind AS 104, Insurance Contracts). However, this Standard applies to provisions, contingent liabilities and contingent assets of an insurer, other than those arising from its contractual obligations and rights under insurance contracts within the scope of Ind AS 104; and (f) contingent consideration of an acquirer in a business combination (see Ind AS 103, Business Combinations). ; (ii) for paragraph 6, the following paragraph shall be sub .....

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ng paragraph shall be substituted, namely:- (i) Appendix A, Service Concession Arrangements and Appendix B, Service 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) .....

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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, Revenue, for recognising revenue from the sale of goods. Ind AS 17 applies to disposal by a sale and leaseback. (iv) for paragraph 116, the following shall be substituted, namely:- 116 The consideration receivable on disposal of an int .....

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es not apply to intangible assets held by an entity for sale in the ordinary course of business (see Ind AS 2 and Ind AS 11) or leases that fall within the scope of Ind AS 17. Accordingly, this Appendix does not apply to expenditure on the development or operation of a web site (or web site software) for sale to another entity. When a web site is leased under an operating lease, the lessor applies this Appendix. When a web site is leased under a finance lease, the lessee applies this Appendix af .....

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Accounting Standards (Ind AS) , in Indian Accounting Standard (Ind AS) 40 , (i) in paragraph 3, for item (b), the following item shall be substituted namely:- (b) recognition of lease income from investment property (see also Ind AS 18, Revenue); ; (ii) in paragraph 9, for item (b), the following item shall be substituted, namely:- (b) property being constructed or developed on behalf of third parties (see Ind AS 11, Construction Contracts). ; (iii) for paragraph 67, the following paragraph shal .....

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