Accounting Standard 9: AS 9 deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise. The Standard is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from
- the sale of goods
- the rendering of services
- the use by others of enterprise resources yielding interest, royalties and dividends
AS 9 does not deal with the following aspects of revenue recognition to which special considerations apply:
- Revenue arising from construction contracts;
- Revenue arising from hire-purchase, lease agreements;
- Revenue arising from government grants and other similar subsidies;
- Revenue of insurance companies arising from insurance contracts
Ind AS 18: Revenue (IAS 18): The primary issue in accounting for revenue is determining when to recognise revenue. Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be met and, therefore, revenue will be recognised. It also provides practical guidance on the application of these criteria.
As per IFRS: On the basis of principles of the IAS 18, IFRIC 15, 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.
Carve out: IFRIC 15 has not been included in Ind AS 18 to scope out such agreements from Ind AS A separate guidance note on accounting for real estate developers (for Ind AS compliant entities) has been issued by the ICAI to address the matter.
Reason: It was observed that requirement will lead to recognition of revenue in the financial statements by real estate developers based on the completion method, i.e., only in the last year of the completion of project. It was felt that in case the revenue for the whole project is recognised in the last year of completion of project, it will not reflect the true performance of the business of the real estate developer. Further, it was felt that since Ind AS 11 requires recognition of revenue of all construction contracts by reference to stage of completion, it may lead to inappropriate accounting in case of certain real estate development projects in case this Ind AS is applied for all real estate development projects.
Difference Between AS 9 and Ind AS 18
|AS 9||Ind AS 18|
|AS 9 does not excludes the same from its scope.||Revenue arising from agreements of real estate development are not covered by Ind AS 18, as this aspect is dealt with under Ind AS 11.|
|AS 9 requires the revenue to be recognised at nominal value of consideration received or receivable.||Ind AS 18 requires the revenue to be recognised at fair value of the consideration received or receivable|
|This aspect is not dealt with by AS 9.||Ind AS 18 specifically deals with the exchange of goods and services with goods and services of similar and dissimilar nature (i.e. revenue recognition in case of barter transactions)|
For recognition of revenue in case of rendering of services, AS 9 gives an option to follow either:
|For recognition of revenue in case of rendering of services, Ind AS 18 permits percentage of completion method only.|
|Requires the recognition of interest income on time proportion basis.||Requires interest income to be recognised using effective interest rate method.|
|AS 9 (ASI 14) states that the amount of excise duty (other than the excise duty on opening and closing stock) to be disclosed as a deduction from Gross Revenue from Sales, and the net balance of Revenue from Sales to be shown on the face of P&L Statement.||Does not specifically deal with the same.|
|AS 9 does not deal with this aspect.||
Ind AS 18 provides guidance regarding recognition of revenue, in case the entity is under an obligation:
due to any customer loyalty programme.
|Disclosure requirements given in the Ind AS 18 are more detailed as compared to existing AS 9.|
AS 9 defines Revenue as:
Gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from:
Definition of ‘revenue’ given in the Ind AS 18 is broad compared to the definition of ‘revenue’ given in existing AS 9.
As per Ind AS 18, Revenue means:
economic benefits that arise in the ordinary course of activities of an entity which result in increases in equity, other than increases relating to contributions from equity participants.
- Difference Between AS 9 and Ind AS 18 - Revenue Recognition
- Difference Between AS 7 and Ind AS 11 - Construction Contracts
- Difference Between AS 1 and IndAS 1 - All you need to know about
- Difference Between AS 2 and Ind AS 2: Valuation of Inventory
- Difference Between AS 3 and Ind AS 7 - Cash Flow Statement
- Difference Between AS 4 and Ind AS 10 - All you need to know about
- Difference Between AS 5 and Ind AS 8 - All you need to know about
- Applicability of Ind AS (Indian Accounting Standards)
- Difference Between AS 10 and Ind AS 16: All you need to know about
- Difference Between AS 11 and Ind AS 21: Foreign Exchange Rates