TaxTMI 
TaxTMI 
Companies (Indian Accounting Standards) (Amendment) Rules, 2016
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.... 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, with comparatives for the periods ending on 31st....
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....l 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 calculated in accordance with the stand-alone financial statements of the NBFCs as on ....
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....raph 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 in Ind AS 38 for revaluation (including the existence of an active market). An entity shall not use these elections for other....
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....re", 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, Revenue, and Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets). ''; (ii) in paragraph 4, for item (c), the following item shall be substituted, namely:- ''(c) c....
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....ease 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 paragraph 15 (if reclassified as held for sale) or 15A (if reclassified as held for distribution to owners) and recognise any reduction or increase in the fair value less costs to sell/costs to distribute of the non-curren....
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....roup 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 owners in accordance with paragraph 26.''. 9. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 107",- (i) for paragraph 5A, the following p....
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....rformance 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 the purposes of the disclosure requirements if the servicing fee is dependent on the amount or timing of the cash flows collected from the transferred financial asset. Similarly, a servicer has continuing involvement for the purposes of the disclosure requirement....
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....graph 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 receivables that result from transactions that are within the scope of Ind AS 17, if the entity chooses as its accounting policy to measure the loss allowance at an amount equal to lifetime expected credit losses. That accounting policy shall be applied to all lease receivables but may be applied separately to fin....
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....raph 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 contained in Ind AS 11, Construction Contracts. ''; (xii) in Appendix 1, after paragraph 2, the following paragraph shall be inserted namely:- ''3. Following paragraphs deal with Ind AS 115, Revenue from Contracts with Customers. As Ind AS 115 is not yet effective, these paragraphs have not been included in this standard. However, in order to maintain consistency with paragraph numbers of IFR....
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....at 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 maintain consistency with paragraph numbers of IFRS 10, the paragraph numbers are retained in Ind AS 110: (i) Paragraph 4(b) (ii) Paragraph 4(c)''. 12. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 112", in paragraph 6, for item (b), the following item shall be substituted, namely:- ''(b) an entity's separate financial statements to which Ind....
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.... 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. For example: (a) an entity presents gains and losses on the disposal of non-current assets, including investments and operating assets, by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses; and (b) an entity may net expenditure related to a provision that is recognised in accordance with Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets, and reimbursed under a contractual arrangement with a third par....
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....fit 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 required in Ind AS for the statement of profit and loss. 85B An entity shall present the line items in the statement of profit and loss that reconcile any subtotals presented in accordance with paragraph 85 with the subtotals or totals required in Ind AS for such statement.''; (xi) for paragraph 113, the following paragraph shall be substituted, namely:- ''113 An entity shall present notes in a systematic manner. In determining a systematic manner, the entity shall consider the effect on the understandability and comparability ....
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..... 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) paragraph 120 shall be omitted*; (xvii) for paragraph 122, the following shall be substituted, namely:- ''122 An entity shall disclose, along with its significant accounting policies or other notes, the judgements, apart from those involving estimations (see paragraph 125), that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.''; (xviii) in Appendix 1, for paragraph 6, following paragraph shall be substituted, namely:- ''6. Following paragraph nu....
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....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 treated as a separate item. ''; (v) for paragraph 37, the following paragraph shall be substituted, namely:- ''37. Information about the carrying amounts held in different classifications of inventories and the extent of the changes in these assets is useful to financial statement users. Common classifications of inventories are merchandise, production supplies, materials, work in progress and finished goods. The inventories of a service provider may be described as work in progress. ''; (vi) in Appendix 1, paragraph 2 shall be omitted. 16. In the principal rules, in the "Annexure", under the heading "B. Indian Acc....
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....truction 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 contracts include: (a) contracts for the rendering of services which are directly related to the construction of the asset, for example, those for the services of project managers and architects; and (b) contracts for the destruction or restoration of assets, and the restoration of the environment following the demolition of assets. 6. Construction contracts are formulated in a number of ways which, for the purposes of this Standard, are classified as fixed price contracts and cost plus contracts. Some construction contracts may contain characteristics of both a fixed price contract and a cost plus contract, for example in the case of a cost plus contract wi....
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....ety 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 agreed in a fixed price contract may increase as a result of cost escalation clauses; (c) the amount of contract revenue may decrease as a result of penalties arising from delays caused by the contractor in the completion of the contract; or (d) when a fixed price contract involves a fixed price per unit of output, contract revenue increases as the number of units is increased. 13. A variation is an instruction by the customer for a change in the scope of the work to be performed under the contract. A variation may lead to an increase or a decrease in contract revenue. Examples of variations are changes in the specifications or design of the asset and changes in the duration of the contract. A variation is included i....
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....tract 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 costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. The allocation is based on the normal level of construction activity. Construction overheads include costs such as the preparation and processing of construction personnel payroll. Costs that may be attributable to contract activity in general and can be allocated to specific contracts also include borrowing costs. 19. Costs that are specifically chargeable to the customer under the terms of the contract may include some general administration costs and development costs for which reimbursement is specified in the terms of the contract. 20. Costs that cannot be attributed to contract activity or cannot be allocated to a contract are excl....
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....sts 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 the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. This method provides useful information on the extent of contract activity and performance during a period. 26. Under the percentage of completion method, contract revenue is recognised as revenue in profit or loss in the accounting periods in which the work is performed. Contract costs are usually recognised as an expense in profit or loss in the accounting periods in which the work to which they relate is performed. However, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately in accordance with paragraph 36. 27. A contractor may have incurred contract costs that relate to future activity on....
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....e, unless the materials have been made specially for the contract; and (b) payments made to subcontractors in advance of work performed under the subcontract. 32. When the outcome of a construction contract cannot be estimated reliably: (a) revenue shall be recognised only to the extent of contract costs incurred that it is probable will be recoverable; and (b) contract costs shall be recognised as an expense in the period in which they are incurred. An expected loss on the construction contract shall be recognised as an expense immediately in accordance with paragraph 36. 33. During the early stages of a contract it is often the case that the outcome of the contract cannot be estimated reliably. Nevertheless, it may be probable that the entity will recover the contract costs incurred. Therefore, contract revenue is recognised only to the extent of costs incurred that are expected to be recoverable. As the outcome of the contract cannot be estimated reliably, no profit is recognised. However, even though the outcome of the contract cannot be estimated reliably, it may be probable that total contract costs will exceed total contract revenues. In such cases, any expected excess....
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....gnised 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 end of the reporting period: (a) the aggregate amount of costs incurred and recognised profits (less recognised losses) to date; (b) the amount of advances received; and (c) the amount of retentions. 41. Retentions are amounts of progress billings that are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified. Progress billings are amounts billed for work performed on a contract whether or not they have been paid by the customer. Advances are amounts received by the contractor before the related work is performed. 42. An entity shall present: (a) the gross amount due from customers for contract work as an asset; and (b) the gross amount due to customers for contract work as a liability. 43. The gross amount due from customers for contract work is the net amount of: (a) costs incurred plus recognised prof....
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....vices related to the infrastructure to be provided to the public, irrespective of the identity of the party that operates the services. The service arrangement contractually obliges the operator to provide the services to the public on behalf of the public sector entity. Other common features are: (a) the party that grants the service arrangement (the grantor) is a public sector entity, including a governmental body, or a private sector entity to which the responsibility for the service has been devolved. (b) the operator is responsible for at least some of the management of the infrastructure and related services and does not merely act as an agent on behalf of the grantor. (c) the contract sets the initial prices to be levied by the operator and regulates price revisions over the period of the service arrangement. (d) the operator is obliged to hand over the infrastructure to the grantor in a specified condition at the end of the period of the arrangement, for little or no incremental consideration, irrespective of which party initially financed it. Scope 4 This Appendix gives guidance on the accounting by operators for public-to-private service concession arrangements 5 T....
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....ause 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 infrastructure to provide the public service on behalf of the grantor in accordance with the terms specified in the contract. Recognition and measurement of arrangement consideration 12 Under the terms of contractual arrangements within the scope of this Appendix, the operator acts as a service provider. The operator constructs or upgrades infrastructure (construction or upgrade services) used to provide a public service and operates and maintains that infrastructure (operation services) for a specified period of time. 13 The operator shall recognise and measure revenue in accordance with Ind AS 11 and Ind AS 18 for the services it performs. If the operator performs more than one service (ie construction or upgrade services and operation services) under a single contract or arrangement, consideration received or receivable shall be allocated by reference to the relative fair values of the services delivered, when the amounts are separately identifiable. The nature of the consideration determines its sub....
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....to restore the infrastructure to a specified level of serviceability 21 The operator may have contractual obligations it must fulfil as a condition of its licence (a) to maintain the infrastructure to a specified level of serviceability or (b) to restore the infrastructure to a specified condition before it is handed over to the grantor at the end of the service arrangement. These contractual obligations to maintain or restore infrastructure, except for any upgrade element (see paragraph 14 of this Appendix), shall be recognised and measured in accordance with Ind AS 37, ie at the best estimate of the expenditure that would be required to settle the present obligation at the end of the reporting period. Borrowing costs incurred by the operator 22 In accordance with Ind AS 23, borrowing costs attributable to the arrangement shall be recognised as an expense in the period in which they are incurred unless the operator has a contractual right to receive an intangible asset (a right to charge users of the public service). In this case borrowing costs attributable to the arrangement shall be capitalised during the construction phase of the arrangement in accordance with that Standard....
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....udes circumstances in which the grantor buys all of the output as well as those in which some or all of the output is bought by other users. In applying this condition, the grantor and any related parties shall be considered together. If the grantor is a public sector entity, the public sector as a whole, together with any regulators acting in the public interest, shall be regarded as related to the grantor for the purposes of this Appendix A. AG3 For the purpose of condition (a), the grantor does not need to have complete control of the price: it is sufficient for the price to be regulated by the grantor, contract or regulator, for example by a capping mechanism. However, the condition shall be applied to the substance of the agreement. Non-substantive features, such as a cap that will apply only in remote circumstances, shall be ignored. Conversely, if for example, a contract purports to give the operator freedom to set prices, but any excess profit is returned to the grantor, the operator's return is capped and the price element of the control test is met. AG4 For the purpose of condition (b), the grantor's control over any significant residual interest should both restrict th....
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....AG7 (a), or the facilities used to provide ancillary unregulated services described in paragraph AG7 (b). In either case, there may in substance be a lease from the grantor to the operator; if so, it shall be accounted for in accordance with Ind AS 17. Information note 1 Accounting framework for public-to-private service arrangements This note accompanies, but is not part of, Appendix A Information note 2 References to Indian Accounting Standards that apply to typical types of public-to-private arrangements This note accompanies, but is not part of, Appendix A. The table sets out the typical types of arrangements for private sector participation in the provision of public sector services and provides references to Indian Accounting Standards that apply to those arrangements. The list of arrangements types is not exhaustive. The purpose of the table is to highlight the continuum of arrangements. It is not Appendix A's intention to convey the impression that bright lines exist between the accounting requirements for public-to-private arrangements Category Lessee Service provider Owner Typical arrangement types Lease (eg Operator leases asset from grantor) Service and/or....
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....ssion arrangements are addressed by Indian Accounting Standards (eg Ind AS 16 applies to acquisitions of items of property, plant and equipment, Ind AS 17 applies to leases of assets, and Ind AS 38 applies to acquisitions of intangible assets). However, a service concession arrangement may involve executory contracts that are not addressed in Indian Accounting Standards, unless the contracts are onerous, in which case Ind AS 37 applies. Therefore, this Appendix addresses additional disclosures of service concession arrangements. Accounting Principles 6. All aspects of a service concession arrangement shall be considered in determining the appropriate disclosures in the notes. An operator and a grantor shall disclose the following in each period: (a) a description of the arrangement; (b) significant terms of the arrangement that may affect the amount, timing and certainty of future cash flows (eg the period of the concession, re-pricing dates and the basis upon which re-pricing or re-negotiation is determined); (c) the nature and extent (eg quantity, time period or amount as appropriate) of: (i) rights to use specified assets; (ii) obligations to provide or rights to expect....
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....cial position' and 'Statement of profit and loss' is used instead of 'Statement of comprehensive income'. 3. Paragraph 2 of IAS 11 which states that IAS 11 supersedes the earlier version of IAS 11 is deleted in Ind AS 11 as this is not relevant in Ind AS 11. However, paragraph number 2 is retained in Ind AS 11 to maintain consistency with paragraph numbers of IAS 11.''. 17. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 12", in paragraph 59, for item (a), the following item shall be substituted namely:- ''(a) Royalty or dividend revenue is received in arrears and is included in accounting profit on a time apportionment basis in accordance with Ind AS 18, Revenue, or Ind AS 109, Financial Instruments, as relevant, but is included in taxable profit (tax loss) on a cash basis; and ''. 18. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 16",- (i) for paragraph 68A, the following paragraph shall be substituted, namely:- ''68A However, an entity that, in the course of its ordinary activities,....
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....here is continuing involvement in the form of significant future performance obligations necessary to earn the fee, whether there are retained risks, the terms of any guarantee arrangements, and the risk of repayment of the fee, shall be considered. Indicators that individually demonstrate that recognition of the entire fee as income when received, if received at the beginning of the arrangement, is inappropriate include: ''; (ii) in Appendix C, in paragraph 4, for item (b), the following item shall be substituted, namely:- ''(b) are public-to-private service concession arrangements within the scope of Appendix A of Ind AS 11, Service Concession Arrangements. ''; (iii) in Appendix D, (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. ''; 20. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", after Indian Accounting Sta....
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....r 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 of time. The services may be rendered within a single period or over more than one period. Some contracts for the rendering of services are directly related to construction contracts, for example, those for the services of project managers and architects. Revenue arising from these contracts is not dealt with in this Standard but is dealt with in accordance with the requirements for construction contracts as specified in Ind AS 11 Construction Contracts. 5 The use by others of entity assets gives rise to revenue in the form of: (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 revenue arising from: (a) lease agreements (see Ind AS 17 Leases); (b) divide....
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....nd 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. 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 determinable of either: (a) the prevailing rate for a similar instrument of an issuer with a similar credit rating; or (b) a rate of interest that discounts the nominal amount of the instrument to the current cash sales price of the goods or services. The difference between the fair value and the nominal amount of the consideration is recognised as interest revenue in accordance with Ind AS 109. 12 When goods or services are exchanged or swapped for goods or services which are of a similar nature and v....
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....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 to the buyer requires an examination of the circumstances of the transaction. In most cases, the transfer of the risks and rewards of ownership coincides with the transfer of the legal title or the passing of possession to the buyer. This is the case for most retail sales. In other cases, the transfer of risks and rewards of ownership occurs at a different time from the transfer of legal title or the passing of possession. 16 If the entity retains significant risks of ownership, the transaction is not a sale and revenue 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 revenue from a particular sale is contingent on the derivation of revenue by the buyer from its sale of the goods; (c) when the goods are shipped subject to....
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....nised as a liability. Rendering of services 20 When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised 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 revenue 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 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 provides useful information on the extent of service activity and performance during a period. Ind AS 11 also requires ....
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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 entity will recover the transaction costs incurred. Therefore, revenue is recognised only to the extent of costs incurred that are expected to be recoverable. As the outcome of the transaction cannot be estimated reliably, no profit 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, revenue is not recognised and the costs incurred are recognised as an expense. When the uncertainties that prevented the outcome of the contract being estimated reliably no longer exist, revenue is recognised in accordance with paragraph 20 rather than in accordance with paragraph 26. Interest and Royalties 29 Reven....
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....rvices from its customer (Customer). Advertisements may be displayed on the Internet or poster sites, broadcast on the television or radio, published in magazines or journals, or presented in another medium. 2 In some cases, no cash or other consideration is exchanged between 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 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. 4 The issue is under what circumstances can a Seller reliably measure revenue at the fair value of advertising services received or provided in a barter transaction. Accounting Principles 5 Revenue from a barter transaction involving advertising cannot be measured ....
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....f 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 should be allocated to them; (ii) when revenue should be recognised; and (iii) if a third party supplies the awards, how revenue should be measured. Accounting Principles 5 An entity shall apply paragraph 13 of Ind AS 18 and account for award credits as a separately identifiable component of the sales transaction(s) in which they are granted (the 'initial sale'). The fair value of the consideration received or receivable in respect of the initial sale shall be allocated between the award credits and the other components of the sale. 6 The consideration allocated to the award credits shall be measured by reference to their fair value. 7 If the entity supplies the awards itself, it shall recognise the consideration allocated to award credits as revenue when award credits are redeemed and it fulfils its obligations to supply awa....
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.... is not a quoted market price for an identical award credit, fair value must be measured using another valuation technique. AG2 An entity may measure the fair value of award credits by reference to the fair value of the awards for which they could be redeemed. The fair value of the award credits takes into account, as appropriate: (a) the amount of the discounts or incentives that would otherwise be offered to customers who have not earned award credits from an initial sale; (b) the proportion of award credits that are not expected to be redeemed by customers; and (c) non-performance risk. If customers can choose from a range of different awards, the fair value of the award credits reflects the fair values of the range of available awards, weighted in proportion to the frequency with which each award is expected to be selected. AG3 In some circumstances, other valuation techniques may be used. For example, if a third party will supply the awards and the entity pays the third party for each award credit it grants, it could measure the fair value of the award credits by reference to the amount it pays the third party, adding a reasonable profit margin. Judgement is required to ....
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....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 the transferred item of property, plant and equipment be measured on initial recognition? (c) If the item of property, plant and equipment is measured at fair value on initial recognition, how should the resulting credit be accounted for? (d) How should the entity account for a transfer of cash from its customer? Accounting Principles Is the definition of an asset met? 9 When an entity receives from a customer a transfer of an item of property, plant and equipment, it shall assess whether the transferred item meets the definition of an asset set out in the Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India. Paragraph 49(a) of the Framework states that 'an asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.' In most circumstances, the entity obtains the right of ownership of the transferred item of property, plant ....
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....for the transferred item of property, plant and equipment, such as connecting the customer to a network, providing the customer with ongoing access to a supply of goods or services, or both. In accordance with paragraph 13 of Ind AS 18, the entity shall identify the separately identifiable services included in the agreement. 15 Features that indicate that connecting the customer to a network is a separately identifiable service include: (a) a service connection is delivered to the customer and represents stand-alone value for that customer; (b) the fair value of the service connection can be measured reliably. 16 A feature that indicates that providing the customer with ongoing access to a supply of goods or services is a separately identifiable service is that, in the future, the customer making the transfer receives the ongoing access, the goods or services, or both at a price lower than would be charged without the transfer of the item of property, plant and equipment. 17 Conversely, a feature that indicates that the obligation to provide the customer with ongoing access to a supply of goods or services arises from the terms of the entity's operating licence or other regula....
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.... 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) 18 and the corresponding International Accounting Standard (IAS) 18, Revenue, SIC 31, Revenue- Barter Transactions Involving Advertising Services, IFRIC 13, Customer Loyalty Programmes and IFRIC 18, Transfers Of Assets from Customers. Comparison with IAS 18, Revenue, SIC 31, IFRIC 13 and IFRIC 18 1. The transitional provisions given in IAS 18, SIC 13 and IFRIC 13 have not been given in Ind AS 18, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. 2. On the basis of principles of the 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 revenue should be recognised when the entity has transferred significant risks and rewards of ownership and retained neither continuing managerial inv....
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....ubstituted, namely:- ''2 According to Ind AS 19 the rate to be used to discount post-employment benefit obligation shall be determined by reference to the market yields on government bonds, whereas under IAS 19 , the government bonds can be used only for those currencies where there is no deep market of high quality corporate bonds. However, requirements given in IAS 19 in this regard have been retained with appropriate modifications for currencies other than Indian rupee.''. 22. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 23", in Appendix A, for paragraph 2, the following paragraph shall be substituted, namely:- ''2 Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts, makes reference to this Standard also.''. 23. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 28", - (i) in paragraph 17, for item (d), the following item shall be substituted, namely:- ''(d) The ultimate or any intermediate parent of the entity produces financial statements avai....
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.... financial asset of one party and a financial liability of the other party unless any corresponding payment is deferred past the date on which the physical assets are transferred. Such is the case with the purchase or sale of goods on trade credit.''; (ii) in Appendix B, for paragraph 1, the following paragraph shall be substituted, namely:- ''1. Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts.''. 25. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 34",- (i) in paragraph 5, for item (e), the following item shall be substituted, namely:- ''(e) notes, comprising significant accounting policies and other explanatory information;''; (ii) in paragraph 15B, for item (b), the following item shall be substituted, namely:- ''(b) recognition of a loss from the impairment of financial assets, property, plant and equipment, intangible assets, or other assets, and the reversal of such an impairment loss; ''; (iii) in paragraph 16A, for the opening paragraph, starting with 'In addition to' and ending with 'year-to-date basis.', the following paragrap....
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....surance contracts within the scope of Ind AS 104; and (f) contingent consideration of an acquirer in a business combination (see Ind AS 103, Business Combinations). ''; (ii) for paragraph 6, the following paragraph shall be substituted, namely:- ''6. Some amounts treated as provisions may relate to the recognition of revenue, for example where an entity gives guarantees in exchange for a fee. This Standard does not address the recognition of revenue. Ind AS 18, Revenue, identifies the circumstances in which revenue is recognised and provides practical guidance on the application of the recognition criteria. This Standard does not change the requirements of Ind AS 18.''; (iii) in Appendix D, for paragraph (i), the following paragraph shall be substituted, namely:- ''(i) Appendix A, Service Concession Arrangements and Appendix B, Service Concession Arrangements: Disclosures, contained in Ind AS 11, Construction Contracts.''; (iv) in Appendix 1, for paragraph 3, the following paragraph shall be substituted, namely:- ''3. The following paragraph numbers appear as 'Deleted' in IAS 37. In order to maintain consistency with paragraph numbers of IAS 37, the paragraph numbers are re....
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....- ''2 Appendix B, Service Concession Arrangements: Disclosures contained in Ind AS 11, Construction Contracts. ''. 29. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "Indian Accounting Standard (Ind AS) 40", (i) in paragraph 3, for item (b), the following item shall be substituted namely:- ''(b) recognition of lease income from investment property (see also Ind AS 18, Revenue); ''; (ii) in paragraph 9, for item (b), the following item shall be substituted, namely:- ''(b) property being constructed or developed on behalf of third parties (see Ind AS 11, Construction Contracts). ''; (iii) for paragraph 67, the following paragraph shall be substituted, namely:- ''67 The disposal of an investment property may be achieved by sale or by entering into a finance lease. In determining the date of disposal for investment property, an entity applies the criteria in Ind AS 18 for recognising revenue from the sale of goods. Ind AS 17 applies to a disposal effected by entering into a finance lease and to a sale and leaseback. ''; (iv) for paragraph 70, the following paragraph shall be substituted, namely:- ''70 The considera....