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Thread: 10 - Indian Accounting Standard (Ind AS) 18 - Earlier Accounting standard (9) - Revenue

  1. #21
    IND-AS
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    Thumbs up Recognition and measurement of Indian Accounting Standard (Ind AS) 18 - Earlier Accounting standard (9) - Revenue

    Recognition and measurement of Indian Accounting Standard (Ind AS) 18 - Earlier Accounting standard (9)

    Revenue


    Recognition and measurement

    21. Determining whether an entity is acting as a principal or as an agent.

    Paragraph 8 states that ‘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.’ Determining whether an entity is acting as a principal or as a n agent requires judgement and consideration of all relevant facts and circumstances.

    An entity is acting as a principal when it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services. Features that indicate that an entity is acting as a principal include:

    (a) the entity has the primary responsibility for providing the goods or services to the customer or for fulfilling the order, for example by being responsible for the acceptability of the products or services ordered or purchased by the customer;
    (b) the entity has inventory risk before or after the customer order, during shipping or on return;
    (c) the entity has latitude in establishing prices, either directly or indirectly, for example by providing additional goods or services; and
    (d) the entity bears the customer’s credit risk for the amount receivable from the customer.

    An entity is acting as an agent when it does not have exposure to the significant risks and rewards associated with the sale of goods or the rendering of services. One feature indicating that an entity is acting as an agent is that the amount the entity earns is predetermined, being either a fixed fee per transaction or a stated percentage of the amount billed to the customer.


  2. #22
    IND-AS
    Guest

    Thumbs up Appendix - 1 of Indian Accounting Standard (Ind AS) 18 - Earlier Accounting standard (9) - Revenue

    Appendix - 1 of Indian Accounting Standard (Ind AS) 18 - Earlier Accounting standard (9)

    Revenue

    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

    Comparison with IAS 18, Revenue

    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 involvement nor effective control. IFRIC 15 has not been included in Ind AS 18 to scope out such agreements and to include the same in Ind AS 11, Construction Contracts. Paragraph 9 of Illustrative Examples of IAS 18 which is with reference to IFRIC 15 has been deleted in Appendix E (Illustrative Examples) of Ind AS 18.
    However, paragraph number 9 has been retained in Appendix E of Ind AS 18 to maintain consistency with paragraph numbers of IAS 18..

    3. Paragraph 2 of IAS 18 which states that IAS 18 supersedes t he earlier version IAS 18 is deleted in Ind AS 18 as this is not relevant in Ind AS 18. However, paragraph number 2 is retained in Ind AS 7 to maintain consistency with paragraph numbers of IAS 18.

    4. Paragraph number 31 appear as ‘Deleted ‘in IAS 18. In order to maintain consistency with paragraph numbers of IAS 18, the paragraph number is retained in Ind AS 18.


  3. #23
    comsdev
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    We heard some years a go about great dispute between Price Waterhouse Coopers and a big listed entity whose main business activity was selling calling cards. PWC (World’s no.1 Audit Company) being the auditors of the company did not agree with the revenue recognition policy of the listed entity. As you know calling cards are not used for a long period after they are sold by the company. There was a question whether the revenue should be recognized at the time of sale of cards or at the time when they are utilized. At the end PWC was the winner of the dispute and that listed entity had to change its revenue recognition policy. Due to that dispute its share price came down from 65CU to 2CU.

    From this scenario you can understand the importance of revenue recognition policy. IAS 18 deals with rules regarding revenue recognition. It’s damn important for every auditor to remain up to date with the alterations of IAS 18 and have a complete grip on the matters specified in it. It is also important for auditors to grasp all the knowledge of IAS 18. A summary of IAS 18 is available for your review. This summary contains all the concepts of IAS 18 with necessary explanations in a very concise way. It is also important for students for revision purpose and for those professionals who does not get time to upgrade their knowledge. You can read it on the following link.

    http://www.ias-plus.com/2011/02/ias-18-revenue/

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