Ind AS 115- Question -Answer

 

Ind AS 115- Revenue from contract with Customers    

Applicability:-                            

 Q1. Whether Ind AS 115 applicable on Real estate?

Ans/- Yes, 

Q2. Applicability of Ind AS 115 on Export incentive received from Govt. e.g, As per the Foreign Trade Policy in India, Merchandise Exports from India Scheme (“MEIS”), the Company is eligible  to 

claim 2% of its FOB value of exports as export incentives.

Ans. No, per paragraph 3 of Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance, ‘government grants’ are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the entity.

In the given case, the export incentive is in the nature of government grant and does not fall within the scope of Ind AS 115, as it is not revenue arising from contract with customer. Such export incentives are benefits given by the government to incentivise companies to export more products.

Identification of Customers:-                            

Q3. A Ltd. provide Advertisement services to Publishers like, NBT, HT etc., 

Case 1 - Purchase Advertisement Space in Advance and then Sales to Advertisers.

Case 2 - Provide best matching services to Advertiser. 

Who is customer?

Ans. Paragraph 6 of Ind AS 115 states that, “an entity shall apply this Standard to a contract, (other than a contract listed in paragraph 5), only if the counter-party to the contract is a customer.

Further, where there is customer identification is not clear then, use Judgement to identify, performance obligation can help to identify. 

In case 1- A Ltd is acting as principal, as it purchase and then sales, in this case Customer is Advertiser.

In case 2- A Ltd is acting as agent, hence Publishers is Customer. 

Non Monetary Exchange:-                                   

 

Q 4. A Hospital ltd., booked advertisement in HT and provide free healthcare services for a month in hospital ?

Ans. Paragraph 5(d) of Ind AS 115 excludes non-monetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers.

for Example- this Standard would not apply to a contract between two oil companies that agree to an exchange of oil to fulfils demand from their customers in different specified locations on a timely basis.

In the current scenario - both belong to different industry and exchange dissimilar goods or services, 

Hence, Ind As 115 is applicable.

for determination of transaction price - Paragraph 66 of Ind AS 115 provides that to determine the transaction price for contracts in which a customer promises consideration in a form other than cash, an entity shall measure the non-cash consideration (or promise of non cash consideration) at fair value.