ICAI proposes to divide Ind AS 115 into two separate standards
The Institute of Chartered Accountants of India (ICAI) proposes to divide Ind AS 115, “Revenue from Contracts with Customers” into two separate accounting standards, first is Ind AS 11, “Construction Contracts” and second is Ind AS 18, “Revenue”. National Advisory Committee on Accounting Standards (NACAS) has already sent its proposal to the central government to defer the implementation of Ind AS 115. International Accounting Standard Board (IASB) has also deferred the implementation of IFRS 15 to 1st January, 2018. Considering these two factors ICAI has proposed to divide Ind AS 115 into two parts.
Ind AS 11, “Construction Contracts” will deal with accounting for construction contracts in the books of contractors as well as real estate developers. The standard is similar to AS 7, “Construction Contracts” subject to certain differences, like inclusion of fair value concept and inclusion of certain appendices etc. Now, Construction Contracts will also include agreements of real estate developers.
Ind AS 18, “Revenue”, will deal with accounting for revenue arising from the sale of goods, the rendering of services and interest and royalties. Under this standard, revenue will be measured at the fair value of the consideration. Now, to recognise revenue from sale of goods would require satisfaction of 5 conditions and from rendering of services would require satisfaction of 4 conditions. Revenue from interest and royalties would be recognised as per Ind AS 109 and after satisfaction of 2 conditions.
After approval of above proposed amendments, Ind AS 115 will be replaced by Ind AS 11 and Ind AS 18.