Objective
1 The objective of this Standard is to establish the principles that an entity shall apply
to report useful information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising from a contract
with a customer.
Meeting the objective
2 To meet the objective in paragraph 1, the core principle of this Standard is that an entity
shall recognise revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
3 An entity shall consider the terms of the contract and all relevant facts and circumstances
when applying this Standard. An entity shall apply this Standard, including the use of any
practical expedients, consistently to contracts with similar characteristics and in similar
circumstances.
4 This Standard specifies the accounting for an individual contract with a customer.
However, as a practical expedient, an entity may apply this Standard to a portfolio of
contracts (or performance obligations) with similar characteristics if the entity reasonably
expects that the effects on the financial statements of applying this Standard to the
portfolio would not differ materially from applying this Standard to the individual
contracts (or performance obligations) within that portfolio. When accounting for a
portfolio, an entity shall use estimates and assumptions that reflect the size and
composition of the portfolio.
Scope
5 An entity shall apply this Standard to all contracts with customers, except the following:
(a) lease contracts within the scope of Ind AS 17, Leases;
(b) insurance contracts within the scope of Ind AS 104, Insurance Contracts;

(c) financial instruments and other contractual rights or obligations within the scope
of Ind AS 109, Financial Instruments, Ind AS 110, Consolidated Financial
Statements, Ind AS 111, Joint Arrangements, Ind AS 27, Separate Financial
Statements and Ind AS 28, Investments in Associates and Joint Ventures; and
(d) 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
fulfil demand from their customers in different specified locations on a timely
basis.
6 An entity shall apply this Standard to a contract (other than a contract listed in paragraph
5) only if the counterparty to the contract is a customer. A customer is a party that has
contracted with an entity to obtain goods or services that are an output of the entity’s
ordinary activities in exchange for consideration. A counterparty to the contract would
not be a customer if, for example, the counterparty has contracted with the entity to
participate in an activity or process in which the parties to the contract share in the risks
and benefits that result from the activity or process (such as developing an asset in a
collaboration arrangement) rather than to obtain the output of the entity’s ordinary
activities.
7 A contract with a customer may be partially within the scope of this Standard and
partially within the scope of other Standards listed in paragraph 5.
(a) If the other Standards specify how to separate and/or initially measure one or
more parts of the contract, then an entity shall first apply the separation and/or
measurement requirements in those Standards. An entity shall exclude from the
transaction price the amount of the part (or parts) of the contract that are initially
measured in accordance with other Standards and shall apply paragraphs 73–86 to
allocate the amount of the transaction price that remains (if any) to each
performance obligation within the scope of this Standard and to any other parts of
the contract identified by paragraph 7(b).
(b) If the other Standards do not specify how to separate and/or initially measure one
or more parts of the contract, then the entity shall apply this Standard to separate
and/or initially measure the part (or parts) of the contract.
8 This Standard specifies the accounting for the incremental costs of obtaining a contract
with a customer and for the costs incurred to fulfil a contract with a customer if those
costs are not within the scope of another Standard (see paragraphs 91–104). An entity
shall apply those paragraphs only to the costs incurred that relate to a contract with a
customer (or part of that contract) that is within the scope of this Standard.

 

Recognition
Identifying the contract
9 An entity shall account for a contract with a customer that is within the scope of this
Standard only when all of the following criteria are met:
(a) the parties to the contract have approved the contract (in writing, orally or in
accordance with other customary business practices) and are committed to
perform their respective obligations;
(b) the entity can identify each party’s rights regarding the goods or services to
be transferred;
(c) the entity can identify the payment terms for the goods or services to be
transferred;
(d) the contract has commercial substance (ie the risk, timing or amount of the
entity’s future cash flows is expected to change as a result of the contract);
and
(e) it is probable that the entity will collect the consideration to which it will be
entitled in exchange for the goods or services that will be transferred to the
customer. In evaluating whether collectability of an amount of consideration
is probable, an entity shall consider only the customer’s ability and intention
to pay that amount of consideration when it is due. The amount of
consideration to which the entity will be entitled may be less than the price
stated in the contract if the consideration is variable because the entity may
offer the customer a price concession (see paragraph 52).
10 A contract is an agreement between two or more parties that creates enforceable rights
and obligations. Enforceability of the rights and obligations in a contract is a matter of
law. Contracts can be written, oral or implied by an entity’s customary business practices.
The practices and processes for establishing contracts with customers vary across legal
jurisdictions, industries and entities. In addition, they may vary within an entity (for
example, they may depend on the class of customer or the nature of the promised goods
or services). An entity shall consider those practices and processes in determining
whether and when an agreement with a customer creates enforceable rights and
obligations.
11 Some contracts with customers may have no fixed duration and can be terminated or
modified by either party at any time. Other contracts may automatically renew on a
periodic basis that is specified in the contract. An entity shall apply this Standard to the
duration of the contract (ie the contractual period) in which the parties to the contract
have present enforceable rights and obligations.

 

12 For the purpose of applying this Standard, a contract does not exist if each party to the
contract has the unilateral enforceable right to terminate a wholly unperformed contract
without compensating the other party (or parties). A contract is wholly unperformed if
both of the following criteria are met:
(a) the entity has not yet transferred any promised goods or services to the customer;
and
(b) the entity has not yet received, and is not yet entitled to receive, any consideration
in exchange for promised goods or services.
13 If a contract with a customer meets the criteria in paragraph 9 at contract inception, an
entity shall not reassess those criteria unless there is an indication of a significant change
in facts and circumstances. For example, if a customer’s ability to pay the consideration
deteriorates significantly, an entity would reassess whether it is probable that the entity
will collect the consideration to which the entity will be entitled in exchange for the
remaining goods or services that will be transferred to the customer.
14 If a contract with a customer does not meet the criteria in paragraph 9, an entity shall
continue to assess the contract to determine whether the criteria in paragraph 9 are
subsequently met.
15 When a contract with a customer does not meet the criteria in paragraph 9 and an entity
receives consideration from the customer, the entity shall recognise the consideration
received as revenue only when either of the following events has occurred:
(a) the entity has no remaining obligations to transfer goods or services to the
customer and all, or substantially all, of the consideration promised by the
customer has been received by the entity and is non-refundable; or
(b) the contract has been terminated and the consideration received from the customer
is non-refundable.
16 An entity shall recognise the consideration received from a customer as a liability until
one of the events in paragraph 15 occurs or until the criteria in paragraph 9 are
subsequently met (see paragraph 14). Depending on the facts and circumstances relating
to the contract, the liability recognised represents the entity’s obligation to either transfer
goods or services in the future or refund the consideration received. In either case, the
liability shall be measured at the amount of consideration received from the customer.
Combination of contracts
17 An entity shall combine two or more contracts entered into at or near the same time with
the same customer (or related parties of the customer) and account for the contracts as a
single contract if one or more of the following criteria are met:

 

(a) the contracts are negotiated as a package with a single commercial objective;
(b) the amount of consideration to be paid in one contract depends on the price or
performance of the other contract; or
(c) the goods or services promised in the contracts (or some goods or services
promised in each of the contracts) are a single performance obligation in
accordance with paragraphs 22–30.
Contract modifications
18 A contract modification is a change in the scope or price (or both) of a contract that is
approved by the parties to the contract. In some industries and jurisdictions, a contract
modification may be described as a change order, a variation or an amendment. A
contract modification exists when the parties to a contract approve a modification that
either creates new or changes existing enforceable rights and obligations of the parties to
the contract. A contract modification could be approved in writing, by oral agreement or
implied by customary business practices. If the parties to the contract have not approved
a contract modification, an entity shall continue to apply this Standard to the existing
contract until the contract modification is approved.
19 A contract modification may exist even though the parties to the contract have a dispute
about the scope or price (or both) of the modification or the parties have approved a
change in the scope of the contract but have not yet determined the corresponding change
in price. In determining whether the rights and obligations that are created or changed by
a modification are enforceable, an entity shall consider all relevant facts and
circumstances including the terms of the contract and other evidence. If the parties to a
contract have approved a change in the scope of the contract but have not yet determined
the corresponding change in price, an entity shall estimate the change to the transaction
price arising from the modification in accordance with paragraphs 50–54 on estimating
variable consideration and paragraphs 56–58 on constraining estimates of variable
consideration.
20 An entity shall account for a contract modification as a separate contract if both of the
following conditions are present:
(a) the scope of the contract increases because of the addition of promised goods or
services that are distinct (in accordance with paragraphs 26–30); and
(b) the price of the contract increases by an amount of consideration that reflects the
entity’s stand-alone selling prices of the additional promised goods or services
and any appropriate adjustments to that price to reflect the circumstances of the
particular contract. For example, an entity may adjust the stand-alone selling price
of an additional good or service for a discount that the customer receives, because

 

it is not necessary for the entity to incur the selling-related costs that it would
incur when selling a similar good or service to a new customer.
21 If a contract modification is not accounted for as a separate contract in accordance with
paragraph 20, an entity shall account for the promised goods or services not yet
transferred at the date of the contract modification (ie the remaining promised goods or
services) in whichever of the following ways is applicable:
(a) An entity shall account for the contract modification as if it were a termination of
the existing contract and the creation of a new contract, if the remaining goods or
services are distinct from the goods or services transferred on or before the date of
the contract modification. The amount of consideration to be allocated to the
remaining performance obligations (or to the remaining distinct goods or services
in a single performance obligation identified in accordance with paragraph 22(b))
is the sum of:
(i) the consideration promised by the customer (including amounts already
received from the customer) that was included in the estimate of the
transaction price and that had not been recognised as revenue; and
(ii) the consideration promised as part of the contract modification.
(b) An entity shall account for the contract modification as if it were a part of the
existing contract if the remaining goods or services are not distinct and, therefore,
form part of a single performance obligation that is partially satisfied at the date
of the contract modification. The effect that the contract modification has on the
transaction price, and on the entity’s measure of progress towards complete
satisfaction of the performance obligation, is recognised as an adjustment to
revenue (either as an increase in or a reduction of revenue) at the date of the
contract modification (ie the adjustment to revenue is made on a cumulative
catch-up basis).
(c) If the remaining goods or services are a combination of items (a) and (b), then the
entity shall account for the effects of the modification on the unsatisfied
(including partially unsatisfied) performance obligations in the modified contract
in a manner that is consistent with the objectives of this paragraph.
Identifying performance obligations
22 At contract inception, an entity shall assess the goods or services promised in a
contract with a customer and shall identify as a performance obligation each
promise to transfer to the customer either:
(a) a good or service (or a bundle of goods or services) that is distinct; or

 

(b) a series of distinct goods or services that are substantially the same and that
have the same pattern of transfer to the customer (see paragraph 23).
23 A series of distinct goods or services has the same pattern of transfer to the customer if
both of the following criteria are met:
(a) each distinct good or service in the series that the entity promises to transfer to the
customer would meet the criteria in paragraph 35 to be a performance obligation
satisfied over time; and
(b) in accordance with paragraphs 39–40, the same method would be used to measure
the entity’s progress towards complete satisfaction of the performance obligation
to transfer each distinct good or service in the series to the customer.
Promises in contracts with customers
24 A contract with a customer generally explicitly states the goods or services that an entity
promises to transfer to a customer. However, the performance obligations identified in a
contract with a customer may not be limited to the goods or services that are explicitly
stated in that contract. This is because a contract with a customer may also include
promises that are implied by an entity’s customary business practices, published policies
or specific statements if, at the time of entering into the contract, those promises create a
valid expectation of the customer that the entity will transfer a good or service to the
customer.
25 Performance obligations do not include activities that an entity must undertake to fulfil a
contract unless those activities transfer a good or service to a customer. For example, a
services provider may need to perform various administrative tasks to set up a contract.
The performance of those tasks does not transfer a service to the customer as the tasks are
performed. Therefore, those setup activities are not a performance obligation.
Distinct goods or services
26 Depending on the contract, promised goods or services may include, but are not limited
to, the following:
(a) sale of goods produced by an entity (for example, inventory of a manufacturer);
(b) resale of goods purchased by an entity (for example, merchandise of a retailer);
(c) resale of rights to goods or services purchased by an entity (for example, a ticket
resold by an entity acting as a principal, as described in paragraphs B34–B38);
(d) performing a contractually agreed-upon task (or tasks) for a customer;

 

(e) providing a service of standing ready to provide goods or services (for example,
unspecified updates to software that are provided on a when-and-if-available
basis) or of making goods or services available for a customer to use as and when
the customer decides;
(f) providing a service of arranging for another party to transfer goods or services to
a customer (for example, acting as an agent of another party, as described in
paragraphs B34–B38);
(g) granting rights to goods or services to be provided in the future that a customer
can resell or provide to its customer (for example, an entity selling a product to a
retailer promises to transfer an additional good or service to an individual who
purchases the product from the retailer);
(h) constructing, manufacturing or developing an asset on behalf of a customer;
(i) granting licences (see paragraphs B52–B63); and
(j) granting options to purchase additional goods or services (when those options
provide a customer with a material right, as described in paragraphs B39–B43).
27 A good or service that is promised to a customer is distinct if both of the following
criteria are met:
(a) the customer can benefit from the good or service either on its own or together
with other resources that are readily available to the customer (ie the good or
service is capable of being distinct); and
(b) the entity’s promise to transfer the good or service to the customer is separately
identifiable from other promises in the contract (ie the good or service is distinct
within the context of the contract).
28 A customer can benefit from a good or service in accordance with paragraph 27(a) if the
good or service could be used, consumed, sold for an amount that is greater than scrap
value or otherwise held in a way that generates economic benefits. For some goods or
services, a customer may be able to benefit from a good or service on its own. For other
goods or services, a customer may be able to benefit from the good or service only in
conjunction with other readily available resources. A readily available resource is a good
or service that is sold separately (by the entity or another entity) or a resource that the
customer has already obtained from the entity (including goods or services that the entity
will have already transferred to the customer under the contract) or from other
transactions or events. Various factors may provide evidence that the customer can
benefit from a good or service either on its own or in conjunction with other readily
available resources. For example, the fact that the entity regularly sells a good or service
separately would indicate that a customer can benefit from the good or service on its own
or with other readily available resources.

 

29 Factors that indicate that an entity’s promise to transfer a good or service to a customer is
separately identifiable (in accordance with paragraph 27(b)) include, but are not limited
to, the following:
(a) the entity does not provide a significant service of integrating the good or service
with other goods or services promised in the contract into a bundle of goods or
services that represent the combined output for which the customer has
contracted. In other words, the entity is not using the good or service as an input
to produce or deliver the combined output specified by the customer.
(b) the good or service does not significantly modify or customise another good or
service promised in the contract.
(c) the good or service is not highly dependent on, or highly interrelated with, other
goods or services promised in the contract. For example, the fact that a customer
could decide to not purchase the good or service without significantly affecting
the other promised goods or services in the contract might indicate that the good
or service is not highly dependent on, or highly interrelated with, those other
promised goods or services.
30 If a promised good or service is not distinct, an entity shall combine that good or service
with other promised goods or services until it identifies a bundle of goods or services that
is distinct. In some cases, that would result in the entity accounting for all the goods or
services promised in a contract as a single performance obligation.
Satisfaction of performance obligations
31 An entity shall recognise revenue when (or as) the entity satisfies a performance
obligation by transferring a promised good or service (ie an asset) to a customer. An
asset is transferred when (or as) the customer obtains control of that asset.
32 For each performance obligation identified in accordance with paragraphs 22–30, an
entity shall determine at contract inception whether it satisfies the performance obligation
over time (in accordance with paragraphs 35–37) or satisfies the performance obligation
at a point in time (in accordance with paragraph 38). If an entity does not satisfy a
performance obligation over time, the performance obligation is satisfied at a point in
time.
33 Goods and services are assets, even if only momentarily, when they are received and used
(as in the case of many services). Control of an asset refers to the ability to direct the use
of, and obtain substantially all of the remaining benefits from, the asset. Control includes
the ability to prevent other entities from directing the use of, and obtaining the benefits
from, an asset. The benefits of an asset are the potential cash flows (inflows or savings in
outflows) that can be obtained directly or indirectly in many ways, such as by:

(a) using the asset to produce goods or provide services (including public services);
(b) using the asset to enhance the value of other assets;
(c) using the asset to settle liabilities or reduce expenses;
(d) selling or exchanging the asset;
(e) pledging the asset to secure a loan; and
(f) holding the asset.
34 When evaluating whether a customer obtains control of an asset, an entity shall consider
any agreement to repurchase the asset (see paragraphs B64–B76).
Performance obligations satisfied over time
35 An entity transfers control of a good or service over time and, therefore, satisfies a
performance obligation and recognises revenue over time, if one of the following criteria
is met:
(a) the customer simultaneously receives and consumes the benefits provided by the
entity’s performance as the entity performs (see paragraphs B3–B4);
(b) the entity’s performance creates or enhances an asset (for example, work in
progress) that the customer controls as the asset is created or enhanced (see
paragraph B5); or
(c) the entity’s performance does not create an asset with an alternative use to the
entity (see paragraph 36) and the entity has an enforceable right to payment for
performance completed to date (see paragraph 37).
36 An asset created by an entity’s performance does not have an alternative use to an entity
if the entity is either restricted contractually from readily directing the asset for another
use during the creation or enhancement of that asset or limited practically from readily
directing the asset in its completed state for another use. The assessment of whether an
asset has an alternative use to the entity is made at contract inception. After contract
inception, an entity shall not update the assessment of the alternative use of an asset
unless the parties to the contract approve a contract modification that substantively
changes the performance obligation. Paragraphs B6–B8 provide guidance for assessing
whether an asset has an alternative use to an entity.
37 An entity shall consider the terms of the contract, as well as any laws that apply to the
contract, when evaluating whether it has an enforceable right to payment for performance
completed to date in accordance with paragraph 35(c). The right to payment for
performance completed to date does not need to be for a fixed amount. However, at all

 

times throughout the duration of the contract, the entity must be entitled to an amount that
at least compensates the entity for performance completed to date if the contract is
terminated by the customer or another party for reasons other than the entity’s failure to
perform as promised. Paragraphs B9–B13 provide guidance for assessing the existence
and enforceability of a right to payment and whether an entity’s right to payment would
entitle the entity to be paid for its performance completed to date.
Performance obligations satisfied at a point in time
38 If a performance obligation is not satisfied over time in accordance with paragraphs 35–
37, an entity satisfies the performance obligation at a point in time. To determine the
point in time at which a customer obtains control of a promised asset and the entity
satisfies a performance obligation, the entity shall consider the requirements for control
in paragraphs 31–34. In addition, an entity shall consider indicators of the transfer of
control, which include, but are not limited to, the following:
(a) The entity has a present right to payment for the asset—if a customer is presently
obliged to pay for an asset, then that may indicate that the customer has obtained
the ability to direct the use of, and obtain substantially all of the remaining
benefits from, the asset in exchange.
(b) The customer has legal title to the asset—legal title may indicate which party to a
contract has the ability to direct the use of, and obtain substantially all of the
remaining benefits from, an asset or to restrict the access of other entities to those
benefits. Therefore, the transfer of legal title of an asset may indicate that the
customer has obtained control of the asset. If an entity retains legal title solely as
protection against the customer’s failure to pay, those rights of the entity would
not preclude the customer from obtaining control of an asset.
(c) The entity has transferred physical possession of the asset—the customer’s
physical possession of an asset may indicate that the customer has the ability to
direct the use of, and obtain substantially all of the remaining benefits from, the
asset or to restrict the access of other entities to those benefits. However, physical
possession may not coincide with control of an asset. For example, in some
repurchase agreements and in some consignment arrangements, a customer or
consignee may have physical possession of an asset that the entity controls.
Conversely, in some bill-and-hold arrangements, the entity may have physical
possession of an asset that the customer controls. Paragraphs B64–B76, B77–B78
and B79–B82 provide guidance on accounting for repurchase agreements,
consignment arrangements and bill-and-hold arrangements, respectively.
(d) The customer has the significant risks and rewards of ownership of the asset—the
transfer of the significant risks and rewards of ownership of an asset to the
customer may indicate that the customer has obtained the ability to direct the use
of, and obtain substantially all of the remaining benefits from, the asset. However,
when evaluating the risks and rewards of ownership of a promised asset, an entity

 

shall exclude any risks that give rise to a separate performance obligation in
addition to the performance obligation to transfer the asset. For example, an entity
may have transferred control of an asset to a customer but not yet satisfied an
additional performance obligation to provide maintenance services related to the
transferred asset.
(e) The customer has accepted the asset—the customer’s acceptance of an asset may
indicate that it has obtained the ability to direct the use of, and obtain substantially
all of the remaining benefits from, the asset. To evaluate the effect of a
contractual customer acceptance clause on when control of an asset is transferred,
an entity shall consider the guidance in paragraphs B83–B86.
Measuring progress towards complete satisfaction of a performance obligation
39 For each performance obligation satisfied over time in accordance with paragraphs 35–
37, an entity shall recognise revenue over time by measuring the progress towards
complete satisfaction of that performance obligation. The objective when measuring
progress is to depict an entity’s performance in transferring control of goods or services
promised to a customer (ie the satisfaction of an entity’s performance obligation).
40 An entity shall apply a single method of measuring progress for each performance
obligation satisfied over time and the entity shall apply that method consistently to
similar performance obligations and in similar circumstances. At the end of each
reporting period, an entity shall remeasure its progress towards complete satisfaction of a
performance obligation satisfied over time.
Methods for measuring progress
41 Appropriate methods of measuring progress include output methods and input methods.
Paragraphs B14–B19 provide guidance for using output methods and input methods to
measure an entity’s progress towards complete satisfaction of a performance obligation.
In determining the appropriate method for measuring progress, an entity shall consider
the nature of the good or service that the entity promised to transfer to the customer.
42 When applying a method for measuring progress, an entity shall exclude from the
measure of progress any goods or services for which the entity does not transfer control
to a customer. Conversely, an entity shall include in the measure of progress any goods or
services for which the entity does transfer control to a customer when satisfying that
performance obligation.
43 As circumstances change over time, an entity shall update its measure of progress to
reflect any changes in the outcome of the performance obligation. Such changes to an
entity’s measure of progress shall be accounted for as a change in accounting estimate in
accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and
Errors.

 

44 An entity shall recognise revenue for a performance obligation satisfied over time only if
the entity can reasonably measure its progress towards complete satisfaction of the
performance obligation. An entity would not be able to reasonably measure its progress
towards complete satisfaction of a performance obligation if it lacks reliable information
that would be required to apply an appropriate method of measuring progress.
45 In some circumstances (for example, in the early stages of a contract), an entity may not
be able to reasonably measure the outcome of a performance obligation, but the entity
expects to recover the costs incurred in satisfying the performance obligation. In those
circumstances, the entity shall recognise revenue only to the extent of the costs incurred
until such time that it can reasonably measure the outcome of the performance obligation.
Measurement
46 When (or as) a performance obligation is satisfied, an entity shall recognise as
revenue the amount of the transaction price (which excludes estimates of variable
consideration that are constrained in accordance with paragraphs 56–58) that is
allocated to that performance obligation.
Determining the transaction price
47 An entity shall consider the terms of the contract and its customary business
practices to determine the transaction price. The transaction price is the amount of
consideration to which an entity expects to be entitled in exchange for transferring
promised goods or services to a customer, excluding amounts collected on behalf of
third parties (for example, some sales taxes). The consideration promised in a
contract with a customer may include fixed amounts, variable amounts, or both.
48 The nature, timing and amount of consideration promised by a customer affect the
estimate of the transaction price. When determining the transaction price, an entity shall
consider the effects of all of the following:
(a) variable consideration (see paragraphs 50–55 and 59);
(b) constraining estimates of variable consideration (see paragraphs 56–58);
(c) the existence of a significant financing component in the contract (see paragraphs
60–65);
(d) non-cash consideration (see paragraphs 66–69); and
(e) consideration payable to a customer (see paragraphs 70–72).

 

49 For the purpose of determining the transaction price, an entity shall assume that the goods
or services will be transferred to the customer as promised in accordance with the
existing contract and that the contract will not be cancelled, renewed or modified.
Variable consideration
50 If the consideration promised in a contract includes a variable amount, an entity shall
estimate the amount of consideration to which the entity will be entitled in exchange for
transferring the promised goods or services to a customer.
51 An amount of consideration can vary because of discounts, rebates, refunds, credits, price
concessions, incentives, performance bonuses, or other similar items. The promised
consideration can also vary if an entity’s entitlement to the consideration is contingent on
the occurrence or non-occurrence of a future event. For example, an amount of
consideration would be variable if either a product was sold with a right of return or a
fixed amount is promised as a performance bonus on achievement of a specified
milestone.
51AA In some contracts, penalties are specified. In such cases, penalties shall be accounted for
as per the substance of the contract. Where the penalty is inherent in determination of
transaction price, it shall form part of variable consideration. For example, where an
entity agrees to transfer control of a good or service in a contact with customer at the end
of 30 days for Rs. 1,00,000 and if it exceeds 30 days, the entity is entitled to receive only
Rs. 95,000, the reduction of Rs. 5,000 shall be regarded as variable consideration. In
other cases, the transaction price shall be considered as fixed.
52 The variability relating to the consideration promised by a customer may be explicitly
stated in the contract. In addition to the terms of the contract, the promised consideration
is variable if either of the following circumstances exists:
(a) the customer has a valid expectation arising from an entity’s customary business
practices, published policies or specific statements that the entity will accept an
amount of consideration that is less than the price stated in the contract. That is, it
is expected that the entity will offer a price concession. Depending on the
jurisdiction, industry or customer this offer may be referred to as a discount,
rebate, refund or credit.
(b) other facts and circumstances indicate that the entity’s intention, when entering
into the contract with the customer, is to offer a price concession to the customer.
53 An entity shall estimate an amount of variable consideration by using either of the
following methods, depending on which method the entity expects to better predict the
amount of consideration to which it will be entitled:
(a) The expected value—the expected value is the sum of probability-weighted
amounts in a range of possible consideration amounts. An expected value may be

 

an appropriate estimate of the amount of variable consideration if an entity has a
large number of contracts with similar characteristics.
(b) The most likely amount—the most likely amount is the single most likely amount
in a range of possible consideration amounts (ie the single most likely outcome of
the contract). The most likely amount may be an appropriate estimate of the
amount of variable consideration if the contract has only two possible outcomes
(for example, an entity either achieves a performance bonus or does not).
54 An entity shall apply one method consistently throughout the contract when estimating
the effect of an uncertainty on an amount of variable consideration to which the entity
will be entitled. In addition, an entity shall consider all the information (historical, current
and forecast) that is reasonably available to the entity and shall identify a reasonable
number of possible consideration amounts. The information that an entity uses to
estimate the amount of variable consideration would typically be similar to the
information that the entity’s management uses during the bid-and-proposal process and in
establishing prices for promised goods or services.
Refund liabilities
55 An entity shall recognise a refund liability if the entity receives consideration from a
customer and expects to refund some or all of that consideration to the customer. A
refund liability is measured at the amount of consideration received (or receivable) for
which the entity does not expect to be entitled (ie amounts not included in the transaction
price). The refund liability (and corresponding change in the transaction price and,
therefore, the contract liability) shall be updated at the end of each reporting period for
changes in circumstances. To account for a refund liability relating to a sale with a right
of return, an entity shall apply the guidance in paragraphs B20–B27.
Constraining estimates of variable consideration
56 An entity shall include in the transaction price some or all of an amount of variable
consideration estimated in accordance with paragraph 53 only to the extent that it is
highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur when the uncertainty associated with the variable consideration
is subsequently resolved.
57 In assessing whether it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur once the uncertainty related to the variable
consideration is subsequently resolved, an entity shall consider both the likelihood and
the magnitude of the revenue reversal. Factors that could increase the likelihood or the
magnitude of a revenue reversal include, but are not limited to, any of the following:
(a) the amount of consideration is highly susceptible to factors outside the entity’s
influence. Those factors may include volatility in a market, the judgement or

actions of third parties, weather conditions and a high risk of obsolescence of the
promised good or service.
(b) the uncertainty about the amount of consideration is not expected to be resolved
for a long period of time.
(c) the entity’s experience (or other evidence) with similar types of contracts is
limited, or that experience (or other evidence) has limited predictive value.
(d) the entity has a practice of either offering a broad range of price concessions or
changing the payment terms and conditions of similar contracts in similar
circumstances.
(e) the contract has a large number and broad range of possible consideration
amounts.
58 An entity shall apply paragraph B63 to account for consideration in the form of a salesbased
or usage-based royalty that is promised in exchange for a licence of intellectual
property.
Reassessment of variable consideration
59 At the end of each reporting period, an entity shall update the estimated transaction price
(including updating its assessment of whether an estimate of variable consideration is
constrained) to represent faithfully the circumstances present at the end of the reporting
period and the changes in circumstances during the reporting period. The entity shall
account for changes in the transaction price in accordance with paragraphs 87–90.
The existence of a significant financing component in the contract
60 In determining the transaction price, an entity shall adjust the promised amount of
consideration for the effects of the time value of money if the timing of payments agreed
to by the parties to the contract (either explicitly or implicitly) provides the customer or
the entity with a significant benefit of financing the transfer of goods or services to the
customer. In those circumstances, the contract contains a significant financing
component. A significant financing component may exist regardless of whether the
promise of financing is explicitly stated in the contract or implied by the payment terms
agreed to by the parties to the contract.
61 The objective when adjusting the promised amount of consideration for a significant
financing component is for an entity to recognise revenue at an amount that reflects the
price that a customer would have paid for the promised goods or services if the customer
had paid cash for those goods or services when (or as) they transfer to the customer (ie
the cash selling price). An entity shall consider all relevant facts and circumstances in
assessing whether a contract contains a financing component and whether that financing
component is significant to the contract, including both of the following:

(a) the difference, if any, between the amount of promised consideration and the cash
selling price of the promised goods or services; and
(b) the combined effect of both of the following:
(i) the expected length of time between when the entity transfers the
promised goods or services to the customer and when the customer pays
for those goods or services; and
(ii) the prevailing interest rates in the relevant market.
62 Notwithstanding the assessment in paragraph 61, a contract with a customer would not
have a significant financing component if any of the following factors exist:
(a) the customer paid for the goods or services in advance and the timing of the
transfer of those goods or services is at the discretion of the customer.
(b) a substantial amount of the consideration promised by the customer is variable
and the amount or timing of that consideration varies on the basis of the
occurrence or non-occurrence of a future event that is not substantially within the
control of the customer or the entity (for example, if the consideration is a salesbased
royalty).
(c) the difference between the promised consideration and the cash selling price of
the good or service (as described in paragraph 61) arises for reasons other than the
provision of finance to either the customer or the entity, and the difference
between those amounts is proportional to the reason for the difference. For
example, the payment terms might provide the entity or the customer with
protection from the other party failing to adequately complete some or all of its
obligations under the contract.
63 As a practical expedient, an entity need not adjust the promised amount of consideration
for the effects of a significant financing component if the entity expects, at contract
inception, that the period between when the entity transfers a promised good or service to
a customer and when the customer pays for that good or service will be one year or less.
64 To meet the objective in paragraph 61 when adjusting the promised amount of
consideration for a significant financing component, an entity shall use the discount rate
that would be reflected in a separate financing transaction between the entity and its
customer at contract inception. That rate would reflect the credit characteristics of the
party receiving financing in the contract, as well as any collateral or security provided by
the customer or the entity, including assets transferred in the contract. An entity may be
able to determine that rate by identifying the rate that discounts the nominal amount of
the promised consideration to the price that the customer would pay in cash for the goods
or services when (or as) they transfer to the customer. After contract inception, an entity

shall not update the discount rate for changes in interest rates or other circumstances
(such as a change in the assessment of the customer’s credit risk).
65 An entity shall present the effects of financing (interest revenue or interest expense)
separately from revenue from contracts with customers in the statement of profit and loss.
Interest revenue or interest expense is recognised only to the extent that a contract asset
(or receivable) or a contract liability is recognised in accounting for a contract with a
customer.
Non-cash consideration
66 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.
67 If an entity cannot reasonably estimate the fair value of the non-cash consideration, the
entity shall measure the consideration indirectly by reference to the stand-alone selling
price of the goods or services promised to the customer (or class of customer) in
exchange for the consideration.
68 The fair value of the non-cash consideration may vary because of the form of the
consideration (for example, a change in the price of a share to which an entity is entitled
to receive from a customer). If the fair value of the non-cash consideration promised by a
customer varies for reasons other than only the form of the consideration (for example,
the fair value could vary because of the entity’s performance), an entity shall apply the
requirements in paragraphs 56–58.
69 If a customer contributes goods or services (for example, materials, equipment or labour)
to facilitate an entity’s fulfilment of the contract, the entity shall assess whether it obtains
control of those contributed goods or services. If so, the entity shall account for the
contributed goods or services as non-cash consideration received from the customer.
Consideration payable to a customer
70 Consideration payable to a customer includes cash amounts that an entity pays, or expects
to pay, to the customer (or to other parties that purchase the entity’s goods or services
from the customer). Consideration payable to a customer also includes credit or other
items (for example, a coupon or voucher) that can be applied against amounts owed to the
entity (or to other parties that purchase the entity’s goods or services from the customer).
An entity shall account for consideration payable to a customer as a reduction of the
transaction price and, therefore, of revenue unless the payment to the customer is in
exchange for a distinct good or service (as described in paragraphs 26–30) that the
customer transfers to the entity. If the consideration payable to a customer includes a
variable amount, an entity shall estimate the transaction price (including assessing
whether the estimate of variable consideration is constrained) in accordance with
paragraphs 50–58.

71 If consideration payable to a customer is a payment for a distinct good or service from the
customer, then an entity shall account for the purchase of the good or service in the same
way that it accounts for other purchases from suppliers. If the amount of consideration
payable to the customer exceeds the fair value of the distinct good or service that the
entity receives from the customer, then the entity shall account for such an excess as a
reduction of the transaction price. If the entity cannot reasonably estimate the fair value
of the good or service received from the customer, it shall account for all of the
consideration payable to the customer as a reduction of the transaction price.
72 Accordingly, if consideration payable to a customer is accounted for as a reduction of the
transaction price, an entity shall recognise the reduction of revenue when (or as) the later
of either of the following events occurs:
(a) the entity recognises revenue for the transfer of the related goods or services to
the customer; and
(b) the entity pays or promises to pay the consideration (even if the payment is
conditional on a future event). That promise might be implied by the entity’s
customary business practices.
Allocating the transaction price to performance obligations
73 The objective when allocating the transaction price is for an entity to allocate the
transaction price to each performance obligation (or distinct good or service) in an
amount that depicts the amount of consideration to which the entity expects to be
entitled in exchange for transferring the promised goods or services to the customer.
74 To meet the allocation objective, an entity shall allocate the transaction price to each
performance obligation identified in the contract on a relative stand-alone selling price
basis in accordance with paragraphs 76–80, except as specified in paragraphs 81–83 (for
allocating discounts) and paragraphs 84–86 (for allocating consideration that includes
variable amounts).
75 Paragraphs 76–86 do not apply if a contract has only one performance obligation.
However, paragraphs 84–86 may apply if an entity promises to transfer a series of
distinct goods or services identified as a single performance obligation in accordance
with paragraph 22(b) and the promised consideration includes variable amounts.
Allocation based on stand-alone selling prices
76 To allocate the transaction price to each performance obligation on a relative stand-alone
selling price basis, an entity shall determine the stand-alone selling price at contract
inception of the distinct good or service underlying each performance obligation in the
contract and allocate the transaction price in proportion to those stand-alone selling
prices.

77 The stand-alone selling price is the price at which an entity would sell a promised good or
service separately to a customer. The best evidence of a stand-alone selling price is the
observable price of a good or service when the entity sells that good or service separately
in similar circumstances and to similar customers. A contractually stated price or a list
price for a good or service may be (but shall not be presumed to be) the stand-alone
selling price of that good or service.
78 If a stand-alone selling price is not directly observable, an entity shall estimate the standalone
selling price at an amount that would result in the allocation of the transaction price
meeting the allocation objective in paragraph 73. When estimating a stand-alone selling
price, an entity shall consider all information (including market conditions, entity-specific
factors and information about the customer or class of customer) that is reasonably
available to the entity. In doing so, an entity shall maximise the use of observable inputs
and apply estimation methods consistently in similar circumstances.
79 Suitable methods for estimating the stand-alone selling price of a good or service include,
but are not limited to, the following:
(a) Adjusted market assessment approach—an entity could evaluate the market in
which it sells goods or services and estimate the price that a customer in that
market would be willing to pay for those goods or services. That approach might
also include referring to prices from the entity’s competitors for similar goods or
services and adjusting those prices as necessary to reflect the entity’s costs and
margins.
(b) Expected cost plus a margin approach—an entity could forecast its expected costs
of satisfying a performance obligation and then add an appropriate margin for that
good or service.
(c) Residual approach—an entity may estimate the stand-alone selling price by
reference to the total transaction price less the sum of the observable stand-alone
selling prices of other goods or services promised in the contract. However, an
entity may use a residual approach to estimate, in accordance with paragraph 78,
the stand-alone selling price of a good or service only if one of the following
criteria is met:
(i) the entity sells the same good or service to different customers (at or near
the same time) for a broad range of amounts (ie the selling price is highly
variable because a representative stand-alone selling price is not
discernible from past transactions or other observable evidence); or
(ii) the entity has not yet established a price for that good or service and the
good or service has not previously been sold on a stand-alone basis (ie the
selling price is uncertain).

80 A combination of methods may need to be used to estimate the stand-alone selling prices
of the goods or services promised in the contract if two or more of those goods or
services have highly variable or uncertain stand-alone selling prices. For example, an
entity may use a residual approach to estimate the aggregate stand-alone selling price for
those promised goods or services with highly variable or uncertain stand-alone selling
prices and then use another method to estimate the stand-alone selling prices of the
individual goods or services relative to that estimated aggregate stand-alone selling price
determined by the residual approach. When an entity uses a combination of methods to
estimate the stand-alone selling price of each promised good or service in the contract,
the entity shall evaluate whether allocating the transaction price at those estimated standalone
selling prices would be consistent with the allocation objective in paragraph 73 and
the requirements for estimating stand-alone selling prices in paragraph 78.
Allocation of a discount
81 A customer receives a discount for purchasing a bundle of goods or services if the sum of
the stand-alone selling prices of those promised goods or services in the contract exceeds
the promised consideration in a contract. Except when an entity has observable evidence
in accordance with paragraph 82 that the entire discount relates to only one or more, but
not all, performance obligations in a contract, the entity shall allocate a discount
proportionately to all performance obligations in the contract. The proportionate
allocation of the discount in those circumstances is a consequence of the entity allocating
the transaction price to each performance obligation on the basis of the relative standalone
selling prices of the underlying distinct goods or services.
82 An entity shall allocate a discount entirely to one or more, but not all, performance
obligations in the contract if all of the following criteria are met:
(a) the entity regularly sells each distinct good or service (or each bundle of distinct
goods or services) in the contract on a stand-alone basis;
(b) the entity also regularly sells on a stand-alone basis a bundle (or bundles) of some
of those distinct goods or services at a discount to the stand-alone selling prices of
the goods or services in each bundle; and
(c) the discount attributable to each bundle of goods or services described in
paragraph 82(b) is substantially the same as the discount in the contract and an
analysis of the goods or services in each bundle provides observable evidence of
the performance obligation (or performance obligations) to which the entire
discount in the contract belongs.
83 If a discount is allocated entirely to one or more performance obligations in the contract
in accordance with paragraph 82, an entity shall allocate the discount before using the
residual approach to estimate the stand-alone selling price of a good or service in
accordance with paragraph 79(c).

Allocation of variable consideration
84 Variable consideration that is promised in a contract may be attributable to the entire
contract or to a specific part of the contract, such as either of the following:
(a) one or more, but not all, performance obligations in the contract (for example, a
bonus may be contingent on an entity transferring a promised good or service
within a specified period of time); or
(b) one or more, but not all, distinct goods or services promised in a series of distinct
goods or services that forms part of a single performance obligation in accordance
with paragraph 22(b) (for example, the consideration promised for the second
year of a two-year cleaning service contract will increase on the basis of
movements in a specified inflation index).
85 An entity shall allocate a variable amount (and subsequent changes to that amount)
entirely to a performance obligation or to a distinct good or service that forms part of a
single performance obligation in accordance with paragraph 22(b) if both of the
following criteria are met:
(a) the terms of a variable payment relate specifically to the entity’s efforts to satisfy
the performance obligation or transfer the distinct good or service (or to a specific
outcome from satisfying the performance obligation or transferring the distinct
good or service); and
(b) allocating the variable amount of consideration entirely to the performance
obligation or the distinct good or service is consistent with the allocation objective
in paragraph 73 when considering all of the performance obligations and payment
terms in the contract.
86 The allocation requirements in paragraphs 73–83 shall be applied to allocate the
remaining amount of the transaction price that does not meet the criteria in paragraph 85.
Changes in the transaction price
87 After contract inception, the transaction price can change for various reasons, including
the resolution of uncertain events or other changes in circumstances that change the
amount of consideration to which an entity expects to be entitled in exchange for the
promised goods or services.
88 An entity shall allocate to the performance obligations in the contract any subsequent
changes in the transaction price on the same basis as at contract inception. Consequently,
an entity shall not reallocate the transaction price to reflect changes in stand-alone selling
prices after contract inception. Amounts allocated to a satisfied performance obligation
shall be recognised as revenue, or as a reduction of revenue, in the period in which the
transaction price changes.

89 An entity shall allocate a change in the transaction price entirely to one or more, but not
all, performance obligations or distinct goods or services promised in a series that forms
part of a single performance obligation in accordance with paragraph 22(b) only if the
criteria in paragraph 85 on allocating variable consideration are met.
90 An entity shall account for a change in the transaction price that arises as a result of a
contract modification in accordance with paragraphs 18–21. However, for a change in the
transaction price that occurs after a contract modification, an entity shall apply
paragraphs 87–89 to allocate the change in the transaction price in whichever of the
following ways is applicable:
(a) An entity shall allocate the change in the transaction price to the performance
obligations identified in the contract before the modification if, and to the extent
that, the change in the transaction price is attributable to an amount of variable
consideration promised before the modification and the modification is accounted
for in accordance with paragraph 21(a).
(b) In all other cases in which the modification was not accounted for as a separate
contract in accordance with paragraph 20, an entity shall allocate the change in
the transaction price to the performance obligations in the modified contract (ie
the performance obligations that were unsatisfied or partially unsatisfied
immediately after the modification).
Contract costs
Incremental costs of obtaining a contract
91 An entity shall recognise as an asset the incremental costs of obtaining a contract
with a customer if the entity expects to recover those costs.
92 The incremental costs of obtaining a contract are those costs that an entity incurs to
obtain a contract with a customer that it would not have incurred if the contract had not
been obtained (for example, a sales commission).
93 Costs to obtain a contract that would have been incurred regardless of whether the
contract was obtained shall be recognised as an expense when incurred, unless those costs
are explicitly chargeable to the customer regardless of whether the contract is obtained.
94 As a practical expedient, an entity may recognise the incremental costs of obtaining a
contract as an expense when incurred if the amortisation period of the asset that the entity
otherwise would have recognised is one year or less.

Costs to fulfil a contract
95 If the costs incurred in fulfilling a contract with a customer are not within the scope
of another Standard (for example, Ind AS 2, Inventories, Ind AS 16, Property, Plant
and Equipment or Ind AS 38, Intangible Assets), an entity shall recognise an asset
from the costs incurred to fulfil a contract only if those costs meet all of the
following criteria:
(a) the costs relate directly to a contract or to an anticipated contract that the
entity can specifically identify (for example, costs relating to services to be
provided under renewal of an existing contract or costs of designing an asset
to be transferred under a specific contract that has not yet been approved);
(b) the costs generate or enhance resources of the entity that will be used in
satisfying (or in continuing to satisfy) performance obligations in the future;
and
(c) the costs are expected to be recovered.
96 For costs incurred in fulfilling a contract with a customer that are within the scope of
another Standard, an entity shall account for those costs in accordance with those other
Standards.
97 Costs that relate directly to a contract (or a specific anticipated contract) include any of
the following:
(a) direct labour (for example, salaries and wages of employees who provide the
promised services directly to the customer);
(b) direct materials (for example, supplies used in providing the promised services to
a customer);
(c) allocations of costs that relate directly to the contract or to contract activities (for
example, costs of contract management and supervision, insurance and
depreciation of tools and equipment used in fulfilling the contract);
(d) costs that are explicitly chargeable to the customer under the contract; and
(e) other costs that are incurred only because an entity entered into the contract (for
example, payments to subcontractors).
98 An entity shall recognise the following costs as expenses when incurred:
(a) general and administrative costs (unless those costs are explicitly chargeable to
the customer under the contract, in which case an entity shall evaluate those costs
in accordance with paragraph 97);

(b) costs of wasted materials, labour or other resources to fulfil the contract that were
not reflected in the price of the contract;
(c) costs that relate to satisfied performance obligations (or partially satisfied
performance obligations) in the contract (ie costs that relate to past performance);
and
(d) costs for which an entity cannot distinguish whether the costs relate to unsatisfied
performance obligations or to satisfied performance obligations (or partially
satisfied performance obligations).
Amortisation and impairment
99 An asset recognised in accordance with paragraph 91 or 95 shall be amortised on a
systematic basis that is consistent with the transfer to the customer of the goods or
services to which the asset relates. The asset may relate to goods or services to be
transferred under a specific anticipated contract (as described in paragraph 95(a)).
100 An entity shall update the amortisation to reflect a significant change in the entity’s
expected timing of transfer to the customer of the goods or services to which the asset
relates. Such a change shall be accounted for as a change in accounting estimate in
accordance with Ind AS 8.
101 An entity shall recognise an impairment loss in profit or loss to the extent that the
carrying amount of an asset recognised in accordance with paragraph 91 or 95 exceeds:
(a) the remaining amount of consideration that the entity expects to receive in
exchange for the goods or services to which the asset relates; less
(b) the costs that relate directly to providing those goods or services and that have not
been recognised as expenses (see paragraph 97).
102 For the purposes of applying paragraph 101 to determine the amount of consideration that
an entity expects to receive, an entity shall use the principles for determining the
transaction price (except for the requirements in paragraphs 56–58 on constraining
estimates of variable consideration) and adjust that amount to reflect the effects of the
customer’s credit risk.
103 Before an entity recognises an impairment loss for an asset recognised in accordance with
paragraph 91 or 95, the entity shall recognise any impairment loss for assets related to the
contract that are recognised in accordance with another Standard (for example, Ind AS 2,
Ind AS 16 and Ind AS 38). After applying the impairment test in paragraph 101, an entity
shall include the resulting carrying amount of the asset recognised in accordance with
paragraph 91 or 95 in the carrying amount of the cash-generating unit to which it belongs
for the purpose of applying Ind AS 36, Impairment of Assets, to that cash-generating unit.

104 An entity shall recognise in profit or loss a reversal of some or all of an impairment loss
previously recognised in accordance with paragraph 101 when the impairment conditions
no longer exist or have improved. The increased carrying amount of the asset shall not
exceed the amount that would have been determined (net of amortisation) if no
impairment loss had been recognised previously.
Presentation
105 When either party to a contract has performed, an entity shall present the contract
in the balance sheet as a contract asset or a contract liability, depending on the
relationship between the entity’s performance and the customer’s payment. An
entity shall present any unconditional rights to consideration separately as a
receivable.
106 If a customer pays consideration, or an entity has a right to an amount of consideration
that is unconditional (ie a receivable), before the entity transfers a good or service to the
customer, the entity shall present the contract as a contract liability when the payment is
made or the payment is due (whichever is earlier). A contract liability is an entity’s
obligation to transfer goods or services to a customer for which the entity has received
consideration (or an amount of consideration is due) from the customer.
107 If an entity performs by transferring goods or services to a customer before the customer
pays consideration or before payment is due, the entity shall present the contract as a
contract asset, excluding any amounts presented as a receivable. A contract asset is an
entity’s right to consideration in exchange for goods or services that the entity has
transferred to a customer. An entity shall assess a contract asset for impairment in
accordance with Ind AS 109. An impairment of a contract asset shall be measured,
presented and disclosed on the same basis as a financial asset that is within the scope of
Ind AS 109 (see also paragraph 113(b)).
108 A receivable is an entity’s right to consideration that is unconditional. A right to
consideration is unconditional if only the passage of time is required before payment of
that consideration is due. For example, an entity would recognise a receivable if it has a
present right to payment even though that amount may be subject to refund in the future.
An entity shall account for a receivable in accordance with Ind AS 109. Upon initial
recognition of a receivable from a contract with a customer, any difference between the
measurement of the receivable in accordance with Ind AS 109 and the corresponding
amount of revenue recognised shall be presented as an expense (for example, as an
impairment loss).
109 This Standard uses the terms ‘contract asset’ and ‘contract liability’ but does not prohibit
an entity from using alternative descriptions in the balance sheet for those items. If an
entity uses an alternative description for a contract asset, the entity shall provide
sufficient information for a user of the financial statements to distinguish between
receivables and contract assets.

109AA An entity shall present separately the amount of excise duty included in the revenue
recognised in the statement of profit and loss.
Disclosure
110 The objective of the disclosure requirements is for an entity to disclose sufficient
information to enable users of financial statements to understand the nature,
amount, timing and uncertainty of revenue and cash flows arising from contracts
with customers. To achieve that objective, an entity shall disclose qualitative and
quantitative information about all of the following:
(a) its contracts with customers (see paragraphs 113–122);
(b) the significant judgements, and changes in the judgements, made in applying
this Standard to those contracts (see paragraphs 123–126); and
(c) any assets recognised from the costs to obtain or fulfil a contract with a
customer in accordance with paragraph 91 or 95 (see paragraphs 127–128).
111 An entity shall consider the level of detail necessary to satisfy the disclosure objective
and how much emphasis to place on each of the various requirements. An entity shall
aggregate or disaggregate disclosures so that useful information is not obscured by either
the inclusion of a large amount of insignificant detail or the aggregation of items that
have substantially different characteristics.
112 An entity need not disclose information in accordance with this Standard if it has
provided the information in accordance with another Standard.
Contracts with customers
113 An entity shall disclose all of the following amounts for the reporting period unless those
amounts are presented separately in the statement of profit and loss in accordance with
other Standards:
(a) revenue recognised from contracts with customers, which the entity shall disclose
separately from its other sources of revenue; and
(b) any impairment losses recognised (in accordance with Ind AS 109) on any
receivables or contract assets arising from an entity’s contracts with customers,
which the entity shall disclose separately from impairment losses from other
contracts.

Disaggregation of revenue
114 An entity shall disaggregate revenue recognised from contracts with customers into
categories that depict how the nature, amount, timing and uncertainty of revenue and cash
flows are affected by economic factors. An entity shall apply the guidance in paragraphs
B87–B89 when selecting the categories to use to disaggregate revenue.
115 In addition, an entity shall disclose sufficient information to enable users of financial
statements to understand the relationship between the disclosure of disaggregated revenue
(in accordance with paragraph 114) and revenue information that is disclosed for each
reportable segment, if the entity applies Ind AS 108, Operating Segments.
Contract balances
116 An entity shall disclose all of the following:
(a) the opening and closing balances of receivables, contract assets and contract
liabilities from contracts with customers, if not otherwise separately presented or
disclosed;
(b) revenue recognised in the reporting period that was included in the contract
liability balance at the beginning of the period; and
(c) revenue recognised in the reporting period from performance obligations satisfied
(or partially satisfied) in previous periods (for example, changes in transaction
price).
117 An entity shall explain how the timing of satisfaction of its performance obligations (see
paragraph 119(a)) relates to the typical timing of payment (see paragraph 119(b)) and the
effect that those factors have on the contract asset and the contract liability balances. The
explanation provided may use qualitative information.
118 An entity shall provide an explanation of the significant changes in the contract asset and
the contract liability balances during the reporting period. The explanation shall include
qualitative and quantitative information. Examples of changes in the entity’s balances of
contract assets and contract liabilities include any of the following:
(a) changes due to business combinations;
(b) cumulative catch-up adjustments to revenue that affect the corresponding contract
asset or contract liability, including adjustments arising from a change in the
measure of progress, a change in an estimate of the transaction price (including
any changes in the assessment of whether an estimate of variable consideration is
constrained) or a contract modification;
(c) impairment of a contract asset;

(d) a change in the time frame for a right to consideration to become unconditional (ie
for a contract asset to be reclassified to a receivable); and
(e) a change in the time frame for a performance obligation to be satisfied (ie for the
recognition of revenue arising from a contract liability).
Performance obligations
119 An entity shall disclose information about its performance obligations in contracts with
customers, including a description of all of the following:
(a) when the entity typically satisfies its performance obligations (for example, upon
shipment, upon delivery, as services are rendered or upon completion of service),
including when performance obligations are satisfied in a bill-and-hold
arrangement;
(b) the significant payment terms (for example, when payment is typically due,
whether the contract has a significant financing component, whether the
consideration amount is variable and whether the estimate of variable
consideration is typically constrained in accordance with paragraphs 56–58);
(c) the nature of the goods or services that the entity has promised to transfer,
highlighting any performance obligations to arrange for another party to transfer
goods or services (ie if the entity is acting as an agent);
(d) obligations for returns, refunds and other similar obligations; and
(e) types of warranties and related obligations.
Transaction price allocated to the remaining performance obligations
120 An entity shall disclose the following information about its remaining performance
obligations:
(a) the aggregate amount of the transaction price allocated to the performance
obligations that are unsatisfied (or partially unsatisfied) as of the end of the
reporting period; and
(b) an explanation of when the entity expects to recognise as revenue the amount
disclosed in accordance with paragraph 120(a), which the entity shall disclose in
either of the following ways:
(i) on a quantitative basis using the time bands that would be most
appropriate for the duration of the remaining performance obligations; or

(ii) by using qualitative information.
121 As a practical expedient, an entity need not disclose the information in paragraph 120 for
a performance obligation if either of the following conditions is met:
(a) the performance obligation is part of a contract that has an original expected
duration of one year or less; or
(b) the entity recognises revenue from the satisfaction of the performance obligation
in accordance with paragraph B16.
122 An entity shall explain qualitatively whether it is applying the practical expedient in
paragraph 121 and whether any consideration from contracts with customers is not
included in the transaction price and, therefore, not included in the information disclosed
in accordance with paragraph 120. For example, an estimate of the transaction price
would not include any estimated amounts of variable consideration that are constrained
(see paragraphs 56–58).
Significant judgements in the application of this Standard
123 An entity shall disclose the judgements, and changes in the judgements, made in applying
this Standard that significantly affect the determination of the amount and timing of
revenue from contracts with customers. In particular, an entity shall explain the
judgements, and changes in the judgements, used in determining both of the following:
(a) the timing of satisfaction of performance obligations (see paragraphs 124–125);
and
(b) the transaction price and the amounts allocated to performance obligations (see
paragraph 126).
Determining the timing of satisfaction of performance obligations
124 For performance obligations that an entity satisfies over time, an entity shall disclose both
of the following:
(a) the methods used to recognise revenue (for example, a description of the output
methods or input methods used and how those methods are applied); and
(b) an explanation of why the methods used provide a faithful depiction of the
transfer of goods or services.
125 For performance obligations satisfied at a point in time, an entity shall disclose the
significant judgements made in evaluating when a customer obtains control of promised
goods or services.

Determining the transaction price and the amounts allocated to performance
obligations
126 An entity shall disclose information about the methods, inputs and assumptions used for
all of the following:
(a) determining the transaction price, which includes, but is not limited to, estimating
variable consideration, adjusting the consideration for the effects of the time value
of money and measuring non-cash consideration;
(b) assessing whether an estimate of variable consideration is constrained;
(c) allocating the transaction price, including estimating stand-alone selling prices of
promised goods or services and allocating discounts and variable consideration to
a specific part of the contract (if applicable); and
(d) measuring obligations for returns, refunds and other similar obligations.
126AA An entity shall reconcile the amount of revenue recognised in the statement of profit and
loss with the contracted price showing separately each of the adjustments made to the
contract price, for example, on account of discounts, rebates, refunds, credits, price
concessions, incentives, performance bonuses, etc., specifying the nature and amount of
each such adjustment separately.
Assets recognised from the costs to obtain or fulfil a contract with a
customer
127 An entity shall describe both of the following:
(a) the judgements made in determining the amount of the costs incurred to obtain or
fulfil a contract with a customer (in accordance with paragraph 91 or 95); and
(b) the method it uses to determine the amortisation for each reporting period.
128 An entity shall disclose all of the following:
(a) the closing balances of assets recognised from the costs incurred to obtain or fulfil
a contract with a customer (in accordance with paragraph 91 or 95), by main
category of asset (for example, costs to obtain contracts with customers, precontract
costs and setup costs); and
(b) the amount of amortisation and any impairment losses recognised in the reporting
period.
Practical expedients

129 If an entity elects to use the practical expedient in either paragraph 63 (about the
existence of a significant financing component) or paragraph 94 (about the incremental
costs of obtaining a contract), the entity shall disclose that fact.

 

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