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Ind AS - 018 (new) - B. Indian Accounting Standards (Ind AS) - Companies Law - Ind AS - 018 (new) - 1[Indian Accounting Standard (Ind AS) 18 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Objective Income is defined in the Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India as increases in economic b .....

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atment of arising from certain types of transactions and events. The primary issue in accounting for is determining when to recognise . is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be met and, therefore, will be recognised. It also provides practical guidance on the application of these criteria. Scope 1 This Standard shall be applied in .....

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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. 2 * 3 Goods includes goods produced by the entity for the purpose of sale and goods purchased for resale, such as merchandise purchased by a retailer or land and other property held for resale. 4 The rendering of services typically involves the performance by the entity of a contractually agreed task over an agreed period o .....

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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 of long-term assets of the entity, for example, patents, trademarks, copyrights and computer software; and (c) dividends-distributions of profits to holders of equity investments in proportion to their holdings of a particular class of capital. 6 This Standard does not deal with arising from: (a) lease agreements (see Ind AS 17 Leases); (b) dividends arisi .....

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ty (see Ind AS 41 Agriculture); (g) initial recognition of agricultural produce (see Ind AS 41); and (h) the extraction of mineral ores. Definitions 7 The following terms are used in this Standard with the meanings specified: is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Fair value is the price that w .....

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ty. Therefore, they are excluded from . Similarly, in an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not . Instead, is the amount of commission. Measurement of 9 shall be measured at the fair value of the consideration received or receivable.3 10 The amount of arising on a transaction is usually determined by agre .....

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ay be less than the nominal amount of cash received or receivable. For example, an entity may provide interest-free credit to the buyer or accept a note receivable bearing a below-market interest rate from the buyer as consideration for the sale of goods. When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest. The imputed rate of interest is the more clearly deter .....

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the exchange is not regarded as a transaction which generates . This is often the case with commodities like oil or milk where suppliers exchange or swap inventories in various locations to fulfil demand on a timely basis in a particular location. When goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates . The is measured at the fair value of the goods or services received, adjusted by the amount of any ca .....

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le components of a single transaction in order to reflect the substance of the transaction. For example, when the selling price of a product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as over the period during which the service is performed. Conversely, the recognition criteria are applied to two or more transactions together when they are linked in such a way that the commercial effect cannot be understood without reference to the series of .....

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) the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of can be measured reliably; (d) it is probable that the economic benefits associated with the transaction will flow to the entity; and (e) the costs incurred or to be incurred in respect of the transaction can be measured reliably. 15 The assessment of when an entity has transferred the significant risks and rewards of ownership .....

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is not a sale and is not recognised. An entity may retain a significant risk of ownership in a number of ways. Examples of situations in which the entity may retain the significant risks and rewards of ownership are: (a) when the entity retains an obligation for unsatisfactory performance not covered by normal warranty provisions; (b) when the receipt of the from a particular sale is contingent on the derivation of by the buyer from its sale of the goods; (c) when the goods are shipped subject .....

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f the amount due. In such a case, if the entity has transferred the significant risks and rewards of ownership, the transaction is a sale and is recognised. Another example of an entity retaining only an insignificant risk of ownership may be a retail sale when a refund is offered if the customer is not satisfied. in such cases is recognised at the time of sale provided the seller can reliably estimate future returns and recognises a liability for returns based on previous experience and other r .....

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an uncertainty arises about the collectability of an amount already included in , 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 originally recognised. 19 and expenses that relate to the same transaction or other event are recognised simultaneously; this process is commonly referred to as the matching of s and expenses. Expenses, including warranties and other costs to be in .....

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ognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: (a) the amount of can be measured reliably; (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 tra .....

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he requirements of that Standard are generally applicable to the recognition of and the associated expenses for a transaction involving the rendering of services. 22 is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. However, when an uncertainty arises about the collectability of an amount already included in , the uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is recognised as an .....

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reporting system. The entity reviews and, when necessary, revises the estimates of as the service is performed. The need for such revisions does not necessarily indicate that the outcome of the transaction cannot be estimated reliably. 24 The 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) .....

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For practical purposes, when services are performed by an indeterminate number of acts over a specified period of time, is recognised on a straight-line basis over the specified 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 is postponed until the significant act is executed. 26 When the outcome of the transaction involving the rendering of services cannot be es .....

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ofit is recognised. 28 When the outcome of a transaction cannot be estimated reliably and it is not probable that the costs incurred will be recovered, 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, is recognised in accordance with paragraph 20 rather than in accordance with paragraph 26. Interest and Royalties 29 arising from the use by others of entity assets yiel .....

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ent. (c) Omitted* 31 Omitted* 32 Omitted* 33 Royalties accrue in accordance with the terms of the relevant agreement and are usually recognised on that basis unless, having regard to the substance of the agreement, it is more appropriate to recognise on some other systematic and rational basis. 34 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 alre .....

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e period, including arising from: (i) the sale of goods; (ii) the rendering of services; and (iii) Omitted* (iv) royalties (v) Omitted * (c) the amount of arising from exchanges of goods or services included in each significant category of . 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, .....

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ween the entities. In some other 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 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 can be measured reliably (paragraph 20(a) of Ind AS 18.This Appendix only applies to an exchange .....

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of the advertising services it provides in a barter transaction, by reference only to non-barter transactions that: (a) involve advertising similar to the advertising in the barter transaction; (b) occur frequently; (c) represent a predominant number of transactions and amount when compared to all transactions to provide advertising that is similar to the advertising in the barter transaction; (d) involve cash and/or another form of consideration (eg marketable securities, non-monetary assets, .....

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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 services supplied by .....

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ts 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 (applying paragraph 13 of Ind AS 18); or (ii) providing for the estimated future costs of supplying the awards (applying .....

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ceivable 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 when award credits are redeemed and it fulfils its obligations to supply awards. The amount of recognised shall be based on the number of award credits that have b .....

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wn 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 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 .....

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the time of the initial sale that has not yet been recognised as 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 .....

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ld 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 awards, the fair value of the award credits reflects the fair values of the range of available awa .....

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fies the requirements of paragraph 6 of Appendix B and is most appropriate in the circumstances. Appendix C Transfers of Assets from Customers Background 1 In the utilities industry, an entity may receive from its customers items of property, plant and equipment that must be used to connect those customers to a network and provide them with ongoing access to a supply of commodities such as electricity, gas or water. Alternatively, an entity may receive cash from customers for the acquisition or .....

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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 Agreements within the scope of this Appendix are agreements in which an entity receives from a customer an .....

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e 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 Appendix addresses the following issues: (a) Is the definition of an asset met? (b) If the definition o .....

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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 flow to the entity. In most circumstances, the entity obtains the right of ownership of the transferr .....

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, use it to settle liabilities, hold it, or distribute it to owners. The entity that receives from a customer a transfer of an item of property, plant and equipment shall consider all relevant facts and circumstances when assessing control of the transferred item. For example, although the entity must use the transferred item of property, plant and equipment to provide one or more services to the customer, it may have the ability to decide how the transferred item of property, plant and equipmen .....

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ial 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 services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a t .....

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

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pply 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. recognition 18 If only one service is identified, the entity shall recognise when the service is performed in accordance with paragraph 20 of Ind AS 18. .....

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for that service is generally determined by the terms of the agreement with the customer. If the agreement does not specify a period, the 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 in accordance with parag .....

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n 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, s 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 is not a part of the Indian Accounting .....

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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 sale of goods and should be recognised when the entity has trans .....

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