BooksIQInd AS 115 prescribes a SINGLE 5-step model for revenue recognition: (1) identify the CONTRACT with the customer; (2) identify the PERFORMANCE OBLIGATIONS; (3) determine the TRANSACTION PRICE; (4) ALLOCATE the price to each performance obligation; (5) recognise revenue when (or as) each performance obligation is SATISFIED.
Key points
- Effective FY 2018-19 for Ind AS-applicable companies, Ind AS 115 replaced Ind AS 18 (Revenue) and Ind AS 11 (Construction Contracts) with one model.
- STEP 1 — Contract: identify an enforceable agreement, commercial substance, identifiable rights & payment terms.
- STEP 2 — Performance Obligations: each distinct good/service.
- STEP 3 — Transaction Price: net of discounts, rebates, variable consideration (constrained), significant financing component, non-cash consideration, and consideration payable to customer.
- STEP 4 — Allocate: based on relative stand-alone selling prices.
- STEP 5 — Recognise: at a POINT IN TIME (transfer of control) OR OVER TIME (input/output method) depending on which criteria are met.
- Detailed disclosures of contracts, performance obligations, transaction price, and significant judgements required.
Reference: Ind AS 115, Companies (Indian Accounting Standards) Rules 2015
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