TMI BlogInstances of non-compliance with Indian Accounting Standards (Ind ASs) on Accounting Policies for measurement of Revenue from Contracts with Customers and Trade ReceivablesX X X X Extracts X X X X X X X X Extracts X X X X ..... ement of Revenue from Contracts with Customers and Trade Receivables As per sub-sec t ion 2(b) of section 132 of t he Companies Act 2013 (the Act) read with rule 4(2)( c) of th e National Financial Reporting Aut h ori t y Rules 2018 (NFRA Rules 2018), the Na t ional Financial Reporting Authority is mandated to moni t or and enforce compliance with accounting standards and auditing standards. Further, NFRA is required by sub-section 2( d) of section 132 of the Act read with rule 4(2) (g) of NFRA Rules, to perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties. 2. NFRA monitors compliance with accounting standards by Companies as part of its review o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account the amount of discounts, incentives, volume rebates, and outgoing taxes on Sales ... .... However, there are several listed companies which correc t ly state their accounting policies in this regard. An example of correc t accounting policy sta t ed by a company is as follows: .. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract ... 4. Appendix A to Ind AS 115 defines the 'transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS 115 (or when the entity applies the practical expedient in accordance with para 63 of Ind AS 115). 6. It has, however, been noticed that many companies in their accounting policy, either stated separately for trade receivables or stated as part of the accounting policy for financial assets which include trade receivables, are erroneously stating that the trade receivables are initially recognized ( or measured) at fair value, which is contrary to the requirements of Ind AS 109. One example of such erroneous accounting policy stated by a large listed company [ Names of companies withheld ] is as follows: Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are recognized initially at fair value, plus in the case of financial assets not recorded at fair value through profit or loss (FVTP L), transaction costs that are attributable to the acquisition of the financial asset ...... However, trade receivables that do not contain a significant financing component are measured at transaction price. Revenue Recognition .. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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