On 29 March 2018, the Ministry of Corporate Affairs (MCA) notified Ind AS 115, Revenue from Contracts with Customers applicable for companies following Indian Accounting Standards (Ind AS). Ind AS 115 is based on IFRS 15, under IFRS and ASC 606, under US GAAP. These new standards are the result of several years of international joint discussions, deliberations and outreach across various sectors by the International Accounting Standards Board and the US Financial Accounting Standards Board.
With effect from financial year beginning from 1 April 2018, Ind AS 115 would replace the existing Ind AS standards, i.e., Ind AS 18, Revenue, Ind AS 11, Construction Contracts and their associated appendices.
Ind AS 115 differs significantly as compared to existing revenue recognition principles. The new standard seeks to remove inconsistencies and weak-nesses in previous revenue requirements, provide a more robust framework and improve comparability of revenue recognition practices across entities. It is also intended to provide more useful information to users of financial statements through improved disclosure requirements. Listed companies will have to start applying Ind AS 115 in their quarterly financial results starting from interim financial results for quarter ending 30 June 2018.
Ind AS 115 requires retrospective application. The standard allows either ’full retrospective’ adoption in which the standard is applied to all of the periods presented, including the comparative period, or a ‘modified retrospective’ adoption, under which the cumulative effect of retrospective application is recognised at the date of initial application. Transition to Ind AS 115 may have significant impact across sectors. Transition to new revenue recognition standard is not only an accounting change but is like to have significant impact on a company’s data, systems and processes.
This publication takes you through each of the key steps involved in recognising revenue under Ind AS 115 and looks at some of the practical implications, the two transition methods, together with their comparative advantages and disadvantages, and available practical expedients. In addition, it includes the disclosure requirement under Ind AS 115. The publication also takes a look at the potential impact on certain key sectors and provides a broad comparison between revenue standards under Indian GAAP, current Ind AS and Ind AS 115.
We trust you will find the same useful.