TaxTMI 
TaxTMI 
Companies (Indian Accounting Standards) (Amendment) Rules, 2016
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....l Company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and includes Housing Finance Companies, Merchant Banking companies, Micro Finance Companies, Mutual Benefit Companies, Venture Capital Fund Companies, Stock Broker or Sub-Broker Companies, Nidhi Companies, Chit Companies, Securitisation and Reconstruction Companies, Mortgage Guarantee Companies, Pension Fund Companies, Asset Management Companies and Core Investment Companies.'. 3. In the principal rules, in rule 4,- (I) in sub-rule (1),- (a) in clause (i), for the words "any company" the words " any company and its holding, subsidiary, joint venture or associate company" shall be substituted; (b) after clause (iii), the following clauses shall be inserted, namely:- " (iv) Notwithstanding the requirement of clauses (i) to (iii), Non-Banking Financial Companies (NBFCs) shall comply with the Indian Accounting Standards (Ind ASs) in preparation of their financial statements and audit respectively, in the following manner, namely:- (a) The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods beginning on or after the 1st April, 2018, wi....
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....ure, the parent has to prepare Ind AS-compliant consolidated financial statements and the NBFC subsidiary, associate and a joint venture has to provide the relevant financial statement data in accordance with the accounting policies followed by the parent company for consolidation purposes (until the NBFC is covered under clause (iv) of sub-rule (1). (v) Notwithstanding clauses (i) to (iv), the holding, subsidiary, joint venture or associate companies of Scheduled commercial banks (excluding RRBs) would be required to prepare Ind AS based financial statements for accounting periods beginning from 1st April, 2018 onwards, with comparatives for the periods ending 31st March, 2018 or thereafter:"; (II) in sub-rule (2), for the words brackets and figure "sub-rule (1)'' the words, brackets and figures "clause (i), (ii) and (iii) of sub-rule (1)'', shall be substituted, wherever they occur; (III) after sub-rule (2), the following sub-rule shall be inserted, namely:- "(2A) For the purposes of calculation of net worth of Non-Banking Financial Companies covered under clause (iv) of sub-rule (1), the following principles shall apply, namely:- (a) the net worth shall be calcula....
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.... Indian Accounting Standards (Ind AS)" in "Indian Accounting Standard (Ind AS) 101", - (i) for paragraph 30, the following paragraph shall be substituted, namely:- ''30 If an entity uses fair value in its opening Ind AS Balance Sheet as deemed cost for an item of property, plant and equipment or an intangible asset (see paragraphs D5 and D7), the entity's first Ind AS financial statements shall disclose, for each line item in the opening Ind AS Balance Sheet: (a) the aggregate of those fair values; and (b) the aggregate adjustment to the carrying amounts reported under previous GAAP. '' ; (ii) in Appendix D,- (a) in paragraph D1, for item (m), the following item shall be substituted, namely:- ''(m) financial assets or intangible assets accounted for in accordance with Appendix A to Ind AS 11 Service Concession Arrangements (paragraph D22); ''; (b) for paragraph D7, the following paragraph shall be substituted, namely:- ''D7 The elections in paragraphs D5 and D6 are also available for: (a) Omitted*; (b) intangible assets that meet: (i) the recognition criteria in Ind AS 38 (including reliable measurement of original cost); and (ii) the criteria....
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....order to maintain consistency with paragraph numbers of IFRS 1, the paragraph numbers are retained in Ind AS 101. ''. 6. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 103", for paragraphs 56, the following paragraph shall be substituted, namely:- ''56 After initial recognition and until the liability is settled, cancelled or expires, the acquirer shall measure a contingent liability recognised in a business combination at the higher of: (a) the amount that would be recognised in accordance with Ind AS 37; and (b) the amount initially recognised less, if appropriate, cumulative amortisation recognised in accordance with Ind AS 18, Revenue. This requirement does not apply to contracts accounted for in accordance with Ind AS 109. ''. 7. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 104", (i) in paragraph 4, for item (a), the following item shall be substituted, namely:- ''(a) product warranties issued directly by a manufacturer, dealer or retailer (see Ind AS 18,....
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....) as held for sale or as held for distribution to owners, but the criteria in paragraphs 7-9 (for held for sale) or in paragraph 12A (for held for distribution to owners) are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale or held for distribution to owners (respectively). In such cases an entity shall follow the guidance in paragraphs 27-29 to account for this change except when paragraph 26A applies.''; (ii) after paragraph 26, following paragraph shall be inserted namely:- ''26A. If an entity reclassifies an asset (or disposal group) directly from being held for sale to being held for distribution to owners, or directly from being held for distribution to owners to being held for sale, then the change in classification is considered a continuation of the original plan of disposal. The entity: (a) shall not follow the guidance in paragraphs 27-29 to account for this change. The entity shall apply the classification, presentation and measurement requirements in this Ind AS that are applicable to the new method of disposal. (b) shall measure the non-current asset (or disposal group) by following the requirements in paragr....
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....ituted, namely:- ''29 If an entity removes an individual asset or liability from a disposal group classified as held for sale, the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group only if the group meets the criteria in paragraphs 7-9. If an entity removes an individual asset or liability from a disposal group classified as held for distribution to owners, the remaining assets and liabilities of the disposal group to be distributed shall continue to be measured as a group only if the group meets the criteria in paragraph 12A. Otherwise, the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale (or as held for distribution to owners) shall be measured individually at the lower of their carrying amounts and fair values less costs to sell (or costs to distribute) at that date. Any non-current assets that do not meet the criteria for held for sale shall cease to be classified as held for sale in accordance with paragraph 26. Any non-current assets that do not meet the criteria for held for distribution to owners shall cease to be classified as held for distribution to ....
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....n the transferred financial asset nor acquires any new contractual rights or obligations relating to the transferred financial asset. An entity does not have continuing involvement in a transferred financial asset if it has neither an interest in the future performance of the transferred financial asset nor a responsibility under any circumstances to make payments in respect of the transferred financial asset in the future. The term 'payment' in this context does not include cash flows of the transferred financial asset that an entity collects and is required to remit to the transferee.''; (d) after paragraph B30, the following paragraph shall be inserted, namely:- ''B30A When an entity transfers a financial asset, the entity may retain the right to service that financial asset for a fee that is included in, for example, a servicing contract. The entity assesses the servicing contract in accordance with the guidance in paragraphs 42C and B30 to decide whether the entity has continuing involvement as a result of the servicing contract for the purposes of the disclosure requirements. For example, a servicer will have continuing involvement in the transferred financial asset for....
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.... financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. ''; (vi) paragraph 5.1.3 shall be omitted*, (vii) for paragraph 5.5.1, the following paragraph shall be substituted, namely:- ''5.5.1 An entity shall recognise a loss allowance for expected credit losses on a financial asset that is measured in accordance with paragraphs 4.1.2 or 4.1.2A, a lease receivable, a loan commitment and a financial guarantee contract to which the impairment requirements apply in accordance with paragraphs 2.1(g), 4.2.1(c) or 4.2.1(d). ''; (viii) for paragraph 5.5.15, the following paragraph shall be substituted, namely:- ''5.5.15 Despite paragraphs 5.5.3 and 5.5.5, an entity shall always measure the loss allowance at an amount equal to lifetime expected credit losses for: (a) trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18. (b) lease receiv....
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....ed at the guarantee amount plus the fair value of the guarantee (which is normally the consideration received for the guarantee). Subsequently, the initial fair value of the guarantee is recognised in profit or loss on a time proportion basis (see Ind AS 18) and the carrying value of the asset is reduced by any loss allowance.''; (e) for paragraph B5.4.3, the following paragraph shall be substituted namely:- ''B5.4.3 Fees that are not an integral part of the effective interest rate of a financial instrument and are accounted for in accordance with Ind AS 18 include: (a) fees charged for servicing a loan; (b) commitment fees to originate a loan when the loan commitment is not measured in accordance with paragraph 4.2.1(a) and it is unlikely that a specific lending arrangement will be entered into; and (c) loan syndication fees received by an entity that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants).''; (xi) in Appendix E, for paragraph 2, the following paragraph shall be substituted namely:- ''2. Appendix A, Service Concession Arrangements conta....
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....es, investment management, investment support and administrative services), either directly or through a subsidiary, to third parties as well as to its investors, even if those activities are substantial to the entity, subject to the entity continuing to meet the definition of an investment entity.''; (b) for paragraph B85E, the following paragraph shall be substituted namely:- ''B85E If an investment entity has a subsidiary that is not itself an investment entity and whose main purpose and activities are providing investment-related services or activities that relate to the investment entity's investment activities, such as those described in paragraphs B85C-B85D, to the entity or other parties, it shall consolidate that subsidiary in accordance with paragraph 32. If the subsidiary that provides the investment-related services or activities is itself an investment entity, the investment entity parent shall measure that subsidiary at fair value through profit or loss in accordance with paragraph 31.''; (vii) in Appendix 1, after paragraph 3, following paragraph shall be inserted, namely:- ''4. Following paragraph numbers appear as 'Deleted' in IFRS 10. In order to maint....
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....is not material except when required by law. This is the case even if the Ind AS contains a list of specific requirements or describes them as minimum requirements. An entity shall also consider whether to provide additional disclosures when compliance with the specific requirements in Ind AS is insufficient to enable users of financial statements to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.''; (iv) for paragraph 34, the following paragraph shall be substituted, namely:- ''34 Ind AS 18, Revenue, defines revenue and requires an entity to measure it at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates the entity allows. An entity undertakes, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. An entity presents the results of such transactions, when this presentation reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same transaction. Fo....
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....ted for using the equity method, separated into the share of items that, in accordance with other Ind ASs: (i) will not be reclassified subsequently to profit or loss; and (ii) will be reclassified subsequently to profit or loss when specific conditions are met.''; (ix) for paragraph 85, the following paragraph shall be substituted, namely:- ''85 An entity shall present additional line items (including by disaggregating the line items listed in paragraph 82), headings and subtotals in the statement of profit and loss, when such presentation is relevant to an understanding of the entity's financial performance.''; (x) after paragraph 85, the following paragraphs shall be inserted, namely:- ''85A When an entity presents subtotals in accordance with paragraph 85, those subtotals shall: (a) be comprised of line items made up of amounts recognised and measured in accordance with Ind AS; (b) be presented and labelled in a manner that makes the line items that constitute the subtotal clear and understandable; (c) be consistent from period to period, in accordance with paragraph 45; and (d) not be displayed with more prominence than the subtotals and totals re....
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.... to an understanding of the financial statements.''; (xv) for paragraph 119, the following paragraph shall be substituted, namely:- ''119 In deciding whether a particular accounting policy should be disclosed, management considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in reported financial performance and financial position. Each entity considers the nature of its operations and the policies that the users of its financial statements wo u l d expect to be disclosed for that type of entity. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in Ind ASs. An example is disclosure of a regular way purchase or sale of financial assets using either trade date accounting or settlement date accounting (see Ind AS 109, Financial Instruments). Some Ind Ass specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow. For example, Ind AS 16 requires disclosure of the measurement bases used for classes of property, plant and equipment.''; (xvi) para....
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....ds. Labour and other costs relating to sales and general administrative personnel are not included but are recognised as expenses in the period in which they are incurred. The cost of inventories of a service provider does not include profit margins or non-attributable overheads that are often factored into prices charged by service providers.''; (iv) for paragraph 29, the following paragraph shall be substituted, namely:- ''29. Inventories are usually written down to net realisable value item by item. In some circumstances, however, it may be appropriate to group similar or related items. This may be the case with items of inventory relating to the same product line that have similar purposes or end uses, are produced and marketed in the same geographical area, and cannot be practicably evaluated separately from other items in that product line. It is not appropriate to write inventories down on the basis of a classification of inventory, for example, finished goods, or all the inventories in a particular operating segment. Service providers generally accumulate costs in respect of each service for which a separate selling price is charged. Therefore, each such service is tr....
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....ified: A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. A fixed price contract is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output, which in some cases is subject to cost escalation clauses. A cost plus contract is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee. 4. A construction contract may be negotiated for the construction of a single asset such as a bridge, building, dam, pipeline, road, ship or tunnel. A construction contract may also deal with the construction of a number of assets which are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use; examples of such contracts include those for the construction of refineries and other complex pieces of plant or equipment. 5. For the purposes of this Standard, construction contr....
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....: (a) the asset differs significantly in design, technology or function from the asset or assets covered by the original contract; or (b) the price of the asset is negotiated without regard to the original contract price. Contract revenue 11. Contract revenue shall comprise: (a) the initial amount of revenue agreed in the contract; and (b) variations in contract work, claims and incentive payments: (i) to the extent that it is probable that they will result in revenue; and (ii) they are capable of being reliably measured. 12. Contract revenue is measured at the fair value of the consideration received or receivable. The measurement of contract revenue is affected by a variety of uncertainties that depend on the outcome of future events. The estimates often need to be revised as events occur and uncertainties are resolved. Therefore, the amount of contract revenue may increase or decrease from one period to the next. For example: (a) a contractor and a customer may agree variations or claims that increase or decrease contract revenue in a period subsequent to that in which the contract was initially agreed; (b) the amount of revenue agree....
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.... (c) such other costs as are specifically chargeable to the customer under the terms of the contract. 17. Costs that relate directly to a specific contract include: (a) site labour costs, including site supervision; (b) costs of materials used in construction; (c) depreciation of plant and equipment used on the contract; (d) costs of moving plant, equipment and materials to and from the contract site; (e) costs of hiring plant and equipment; (f) costs of design and technical assistance that is directly related to the contract; (g) the estimated costs of rectification and guarantee work, including expected warranty costs; and (h) claims from third parties. These costs may be reduced by any incidental income that is not included in contract revenue, for example income from the sale of surplus materials and the disposal of plant and equipment at the end of the contract. 18. Costs that may be attributable to contract activity in general and can be allocated to specific contracts include: (a) insurance; (b) costs of design and technical assistance that are not directly related to a specific contract; and (c) construction overheads. Such co....
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....following conditions are satisfied: (a) total contract revenue can be measured reliably; (b) it is probable that the economic benefits associated with the contract will flow to the entity; (c) both the contract costs to complete the contract and the stage of contract completion at the end of the reporting period can be measured reliably; and (d) the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates. 24. In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: (a) it is probable that the economic benefits associated with the contract will flow to the entity; and (b) the contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and measured reliably. 25. The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching t....
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....the contract, the methods may include: (a) the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs; (b) surveys of work performed; or (c) completion of a physical proportion of the contract work. Progress payments and advances received from customers often do not reflect the work performed. 31. When the stage of completion is determined by reference to the contract costs incurred to date, only those contract costs that reflect work performed are included in costs incurred to date. Examples of contract costs which are excluded are: (a) contract costs that relate to future activity on the contract, such as costs of materials that have been delivered to a contract site or set aside for use in a contract but not yet installed, used or applied during contract performance, unless the materials have been made specially for the contract; and (b) payments made to subcontractors in advance of work performed under the subcontract. 32. When the outcome of a construction contract cannot be estimated reliably: (a) revenue shall be recognised only to the extent of contract costs incurred that it is probable....
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....amount of profits expected to arise on other contracts which are not treated as a single construction contract in accordance with paragraph 9. Changes in estimates 38. The percentage of completion method is applied on a cumulative basis in each accounting period to the current estimates of contract revenue and contract costs. Therefore, the effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate (see Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors). The changed estimates are used in the determination of the amount of revenue and expenses recognised in profit or loss in the period in which the change is made and in subsequent periods. Disclosure 39. An entity shall disclose: (a) the amount of contract revenue recognised as revenue in the period; (b) the methods used to determine the contract revenue recognised in the period; and (c) the methods used to determine the stage of completion of contracts in progress. 40. An entity shall disclose each of the following for contracts in progress at the ....
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....ture. The infrastructure may already exist, or may be constructed during the period of the service arrangement. An arrangement within the scope of this Appendix typically involves a private sector entity (an operator) constructing the infrastructure used to provide the public service or upgrading it (for example, by increasing its capacity) and operating and maintaining that infrastructure for a specified period of time. The operator is paid for its services over the period of the arrangement. The arrangement is governed by a contract that sets out performance standards, mechanisms for adjusting prices, and arrangements for arbitrating disputes. Such an arrangement is often described as a 'build-operate-transfer', a 'rehabilitate-operate-transfer' or a 'public-to-private' service concession arrangement. 3 A feature of these service arrangements is the public service nature of the obligation undertaken by the operator. Public policy is for the services related to the infrastructure to be provided to the public, irrespective 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 b....
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....16 ) apply to such infrastructure. 9 This Appendix does not specify the accounting by grantors. Issues 10 This Appendix sets out general principles on recognising and measuring the obligations and related rights in service concession arrangements. Requirements for disclosing information about service concession arrangements are in Appendix B to this Indian Accounting Standard. The issues addressed in this Appendix are: (a) treatment of the operator's rights over the infrastructure; (b) recognition and measurement of arrangement consideration; (c) construction or upgrade services; (d) operation services; (e) borrowing costs; (f) subsequent accounting treatment of a financial asset and an intangible asset; and (g) items provided to the operator by the grantor. Accounting Principles Treatment of the operator's rights over the infrastructure 11 Infrastructure within the scope of this Appendix shall not be recognised as property, plant and equipment of the operator because the contractual service arrangement does not convey the right to control the use of the public service infrastructure to the operator. The operator has access to operate the infr....
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....fficiency requirements. 17 The operator shall recognise an intangible asset to the extent that it receives a right (a licence) to charge users of the public service. A right to charge users of the public service is not an unconditional right to receive cash because the amounts are contingent on the extent that the public uses the service. 18 If the operator is paid for the construction services partly by a financial asset and partly by an intangible asset it is necessary to account separately for each component of the operator's consideration. The consideration received or receivable for both components shall be recognised initially at the fair value of the consideration received or receivable. 19 The nature of the consideration given by the grantor to the operator shall be determined by reference to the contract terms and, when it exists, relevant contract law. Operation services 20 The operator shall account for revenue and costs relating to operation services in accordance with Ind AS 18. Contractual obligations to restore the infrastructure to a specified level of serviceability 21 The operator may have contractual obligations it must fulfil as a condition ....
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....m part of the consideration payable by the grantor for the services, they are not government grants as defined in Ind AS 20. They are recognised as assets of the operator, measured at fair value on initial recognition. The operator shall recognise a liability in respect of unfulfilled obligations it has assumed in exchange for the assets. Application Guidance on Appendix A This Application Guidance is an integral part of Appendix A Scope (paragraph 5 of Appendix A) AG1 Paragraph 5 of Appendix A specifies that infrastructure is within the scope of the Appendix when the following conditions apply: (a) the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price; and (b) the grantor controls-through ownership, beneficial entitlement or otherwise-any significant residual interest in the infrastructure at the end of the term of the arrangement. AG2 The control or regulation referred to in condition (a) could be by contract or otherwise (such as through a regulator), and includes circumstances in which the grantor buys all of the output as well as those in which some or all of the o....
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....st in the final replacement of that part. AG7 Sometimes the use of infrastructure is partly regulated in the manner described in paragraph 5(a) of Appendix A and partly unregulated. However, these arrangements take a variety of forms: (a) any infrastructure that is physically separable and capable of being operated independently and meets the definition of a cash-generating unit as defined in Ind AS 36 shall be analysed separately if it is used wholly for unregulated purposes. For example, this might apply to a private wing of a hospital, where the remainder of the hospital is used by the grantor to treat public patients. (b) when purely ancillary activities (such as a hospital shop) are unregulated, the control tests shall be applied as if those services did not exist, because in cases in which the grantor controls the services in the manner described in paragraph 5 of Appendix A, the existence of ancillary activities does not detract from the grantor's control of the infrastructure. AG8 The operator may have a right to use the separable infrastructure described in paragraph AG7 (a), or the facilities used to provide ancillary unregulated services described....
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....oncession arrangements include an entity outsourcing the operation of its internal services (eg employee cafeteria, building maintenance, and accounting or information technology functions). 2. A service concession arrangement generally involves the grantor conveying for the period of the concession to the operator: (a) the right to provide services that give the public access to major economic and social facilities, and (b) in some cases, the right to use specified tangible assets, intangible assets, or financial assets, in exchange for the operator: (c) committing to provide the services according to certain terms and conditions during the concession period, and (d) when applicable, committing to return at the end of the concession period the rights received at the beginning of the concession period and/or acquired during the concession period. 3. The common characteristic of all service concession arrangements is that the operator both receives a right and incurs an obligation to provide public services. 4. The issue is what information should be disclosed in the notes in the financial statements of an operator and a grantor. 5. Certain aspects and dis....
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.... integral part of Indian Accounting Standard (Ind AS) 11. This appendix lists the appendices which are part of other Indian Accounting Standards and makes reference to Ind AS 11, Construction Contracts. 1. Appendix A Intangible Assets-Web Site Costs contained in Ind AS 38, Intangible Assets. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 11 and the corresponding International Accounting Standard (IAS) 11, Construction Contracts, IFRIC 12, Service 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 IFRS 1, First-time Adoption of International Financial Reporting Standards. ....
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....ment is recognised initially at its fair value. If payment for the item is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield on the receivable.''; (iv) in Appendix C, (a) for paragraph 1, the following paragraph shall be substituted, namely:- ''1 Appendix A, Service Concession Arrangements 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.''; 19. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 17", (i) in Appendix B, in paragraph 8, for opening paragraph starting with 'The requirements in' and ending with 'is inappropriate include:', the following paragraph shall be substituted, namely:- ''8. The criteria in paragraph 20 of Ind AS 18, Revenue, shall be applie....
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....atment of revenue arising from certain types of transactions and events. The primary issue in accounting for revenue is determining when to recognise revenue. Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be met and, therefore, revenue will be recognised. It also provides practical guidance on the application of these criteria. Scope 1 This Standard shall be applied in accounting for revenue arising from the following transactions and events^2: (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 right to receive cash or another financial asset arising from this Standard shall be deal....
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....contributions from equity participants. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.(See Ind AS 113, Fair Value Measurement) 8 Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes 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 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 revenue. Instead, revenue is the amount of commission. Measurement of revenue 9 Revenue shall be measured at the fair value of the consideration received or receivable.^3 10 The amount of revenue arising on a transaction is usually determined by agreement between the entity and the buyer or user of the ....
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....However, in certain circumstances, it is necessary to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction. For example, when the selling price of a product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as revenue over the period during which the service is performed. Conversely, the recognition criteria are applied to two or more transactions together when they 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 satisfied: (a) the entity has transferred to the buyer the significant risks and rewards of ownership of the goods; (b) the entity retains neither continuing managerial involvem....
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....the seller can reliably estimate future returns and recognises a liability for returns based on previous experience and other relevant factors. 18 Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. In some cases, this may not be probable until the consideration is received or until an uncertainty is removed. For example, it may be uncertain that a foreign governmental authority will grant permission to remit the consideration from a sale in a foreign country. When the permission is granted, the uncertainty is removed and revenue is recognised. 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. 19 Revenue and expenses 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 ship....
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....eceived by the parties; (b) the consideration to be exchanged; and (c) the manner and terms of settlement. It is also usually necessary for the entity to have an effective internal financial budgeting and reporting system. The entity reviews and, when necessary, revises the estimates of revenue as the service is performed. The need for such revisions does not necessarily indicate that the outcome of the transaction cannot be estimated reliably. 24 The 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 transaction. Only costs that reflect services performed to date are included in costs incurred to date. Only costs that reflect services performed or to be performed are included in the estimated total costs of the transaction. Progress payments and advances received from customers often do no....
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....nise 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 recognised. Disclosure 35 An entity shall disclose: (a) the accounting policies adopted for the recognition of revenue, including the methods adopted to determine the stage of completion of transactions involving the rendering of services; (b) the amount of each significant category of revenue recognised during the period, including revenue arising from: (i) the sale of goods; (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 3....
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....endix B Customer Loyalty Programmes Background 1 Customer loyalty programmes are used by entities to provide customers with incentives to buy their goods or services. If a customer buys goods or services, the entity grants the customer award credits (often described as 'points'). The customer can redeem the award credits for awards such as free or discounted goods or services. 2 The programmes operate 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 the entity itself and/or rights to claim goods or services from a third party. Scope 3 This Appendix applies to customer loyalty award credits that: (a) an entity grants to its customers as part of a sales transaction, ie a sale of goods, rendering of services or use by a customer of entity assets; and (b) subject ....
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.... 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 party. (b) If the entity is collecting the consideration on its own account, it shall measure its revenue as the gross consideration allocated to the award credits and recognise the revenue when it fulfils its obligations in respect of the awards. 9 If at any time the unavoidable costs of meeting the obligations to supply the awards are expected to exceed the consideration 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 t....
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....hase of goods or services based on usage. 2 Transfers of assets from customers may also occur in industries other than utilities. For example, an entity outsourcing its information technology functions may transfer its existing items of property, plant and equipment to the outsourcing provider. 3 In some cases, the transferor of the asset may not be the entity that will eventually have 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 item of property, plant and equipment that the entity must then use 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. 6 This Appendix also applies to agreements in which an entity receives cash from a customer when that amou....
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....all relevant facts and circumstances when assessing control of the transferred item. For example, although the entity must use the transferred item of property, plant and equipment to provide one or more services to the customer, it may have the ability to decide how the transferred item of property, plant and equipment is operated and maintained and when it is replaced. In this case, the entity would normally conclude that it controls the transferred item of property, plant and equipment. How should the transferred item of property, plant and equipment be measured on initial recognition? 11 If the entity concludes that the definition of an asset is met, it shall recognise the transferred asset as an item of property, 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....
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....requires the fair value of the total consideration received or receivable for the agreement to be allocated to each service and the recognition criteria of Ind AS 18 are then applied to each service. 20 If an ongoing service is identified as part of the agreement, the period over which revenue shall be recognised for that service is generally determined by the terms of the 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 in accordance with paragraph 6. If it is, the entity shall assess whether the constructed or acquired item of property, plant and equipment meets the definition of an asset in accordance with paragraphs 9 and 10. If the definition of an asset is met, the entity shall recognise the item of property, plant and equipment at its cost in accordance with Ind AS 16 and shall recognise revenue in a....
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....y with paragraph numbers of IAS 18, the paragraph number is retained in Ind AS 18. 5. Paragraph 30(c), 32, 35 b(iii), 35b(v) appear as 'Deleted' in Ind AS 18 which addresses revenue in form of interest and dividend. The recognition, measurement of dividend is given in Ind AS 109, whereas the measurement of interest is given in Ind AS 109. 6. Paragraph 1A is inserted which states that recognition of interest is dealt in this standard whereas measurement of interest charges for the use of cash or cash equivalents or amounts due to the entity and recognition and measurement of dividend is dealt in accordance with Ind 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 used to discount post-employment benefit obligations (b....
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....es, associates or joint ventures, the profit or loss, other comprehensive income and net assets taken into account in applying the equity method are those recognised in the associate's or joint venture's financial statements (including the associate's or joint venture's share of the profit or loss, other comprehensive income and net assets of its associates and joint 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 paragraph 36A, if an associate or a joint venture uses accounting policies other than those of the entity for like transactions and events in similar circumstances, adjustments shall be made to make the associate's or joint venture's accounting policies conform to those of the entity when the associate's or joint venture's financial statements are used by the entity in applying the equity method.''; (iv) after paragraph 36, the following paragraph shall be inserted, namely:- ''36A Notwithstanding the requirement in paragraph 36, if an entity that is not itself an investment entity has an....
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....s available to users of the financial statements on the same terms as the interim financial statements and at the same time. If users of the financial statements do not have access to the information incorporated by cross-reference on the same terms and at the same time, the interim financial report is incomplete. The information shall normally be reported on a financial year-to-date basis.''; (iv) in paragraph 16A, item (l) shall be omitted. 26. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (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, contingent liability or contingent asset, an entity applies that Standard instead of th....
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....aragraph 3, item (i) shall be omitted. (iii) for paragraph 114, the following paragraph shall be substituted, namely:- ''114 The disposal of an intangible asset may occur in a variety of ways (eg by sale, by entering into a finance lease, or by donation). In determining the date of disposal of such an asset, an entity applies the criteria in Ind AS 18, 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 intangible asset is recognised initially at its fair value. If payment for the intangible asset is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield on the receivable. ''; (v) in Appendix A, for paragraph 6, the following paragraph shall be substituted, namely:- ''6 Ind AS 38 does not apply to intangible assets held by an entity for sale in the ordinary course....