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Revenue [Omitted w.e.f. 1st day of April, 2018]

Ind AS - 018 (new) - Rules - B. Indian Accounting Standards (Ind AS) - Companies (Indian Accounting Standards) Rules, 2015 - Ind AS - 018 (new) - 2[*****] ******************** Notes:- 1. Inserted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 2. Omitted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, 1[Indian Accounting Standard (Ind AS) 18 Revenue (This Indian Accounting Standard includes paragraphs set in bold type and plain t .....

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ome 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 .....

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ssets 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 right to receive cash or another financial asset arising from this Standard shall be dealt in accordance with Ind AS 109, Financi .....

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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: (a) interest-charges for the use of cash or cash equivalents or amounts due to the entity; (b) royalties-charges for the use o .....

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nsurance 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 Ind AS 41 Agriculture); (g) initial recognition of agricultural produce (see Ind AS 41); and (h) the extraction of mineral ores .....

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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 increases in equity. Therefore, they are excluded from revenue. Similarly, in an agency relationship, the gross inflows of economic bene .....

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ed 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 equivalents is deferred, the fair value of the consideration may be less than the nominal amount of cash received or receivable .....

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nt 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 swapped for goods or services which are of a similar nature and value, the exchange is not regarded as a transaction which gener .....

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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 t .....

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hole. 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 satisfied: (a) the entity has transferred to the buyer the significant risks and rewards of ownership of the goods; (b) the entit .....

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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 transfer of legal title or the passing of possession. 16 If the entity retains significant risks of ownership, the transaction is .....

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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 ownership, the transaction is a sale and revenue is recognised. For example, a seller may retain the legal title to the goods solely to .....

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urns 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 permission to remit the consideration from a sale in a foreign country. When the permission is granted, the un .....

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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 already received for the sale of the goods is recognised as a liability. Rendering of services 20 When the outcome of a transaction .....

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tion 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, revenue is recognised in the accounting periods in which the services are rendered. The recognition of revenue on this basis provide .....

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t 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 part .....

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iety 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 transaction. Only costs that reflect services performed to date are included in costs incurred to date. Only costs that reflect services .....

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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 is often the case that the outcome of the transaction cannot be estimated reliably. Nevertheless, it may be probable that the en .....

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utcome 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 economic benefits associated with the transaction will flow to the entity; and (b) the amount of the revenue can be measured reliab .....

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ate 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 adjustment of the amount of revenue originally rec .....

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anges 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. Appendix A Revenue-Barter Transactions Involving Advertising Services Issue 1 An entity (Seller) may enter into a barter transaction to .....

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tising 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 advertising services. An exchange of similar advertising services is not a transaction that generates revenue under Ind AS 18. .....

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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 .....

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pecified 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 services supplied by the entity itself and/or rights to claim goods or services from a third party. Scope 3 This Appendix applies t .....

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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 supplying the awards (applying paragraph 19 of Ind AS 18); and (b) if consideration is allocated to the award credits: (i) how much s .....

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nd 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 shall be based on the number of award credits that have been redeemed in exchange for awards, relative to the total number expe .....

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ted 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 chooses to claim awards from the third pa .....

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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 its expectations about the number of award credits that will be redeemed. Application guidance on Appendix B This application gu .....

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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 awards, the fair value of the award credits reflects the fair values of the range of available awards, weighted in proportion to .....

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raph 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 .....

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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 Agreements within the scope of this Appendix are agreements in which an entity receives from a customer an item of property, plant and e .....

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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 Appendix addresses the following issues: (a) Is the definition of an asset met? (b) If the definition of an asset is met, how should .....

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ansferred 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 flow to the entity. In most circumstances, the entity obtains the right of ownership of the transferred item of property, plant and .....

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, 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 a .....

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lue 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 services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates rev .....

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g 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 customer and represents stand-alone value for that customer; (b) the fair value of the service connection can be measured relia .....

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r 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 .....

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all 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 an entity receives a transfer of cash from a customer, it shall assess whether the agreement is within the scope of this Appendix .....

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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 the Substance of Transactions Involving the Legal Form of a Lease contained in Ind AS 17 Leases. Appendix 1 Note: This appendix .....

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ven 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 IAS 18, IFRIC 15 on Agreement for Construction of Real Estate prescribes that construction of real estate should be treated as sal .....

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