Income Computation and Disclosure Standard (ICDS) IV – Revenue Recognition
ICDS-IV prescribes the recognition of revenue from the sale of goods, rendering of services, interest, royalties, and dividends. Revenue from construction contracts is governed separately by ICDS-III.
- Scope– ICDS-IV applies to revenue arising from:
Sale of Goods
Rendering of Services
Use of a Person’s Resources (yielding interest, royalties, or dividends)
It also applies to non-residents earning income taxable on a gross basis under Section 115A.
- Revenue Recognition from Sale of Goods
Revenue is recognized when significant risks and rewards of ownership are transferred to the buyer.
Legal title retention solely for securing payment does not delay revenue recognition.
If collection is uncertain, revenue recognition is postponed until reasonable certainty exists.
- Revenue Recognition from Rendering of Services
Revenue is recognized on a Percentage of Completion Method (POCM).
In continuous service contracts, revenue may be recognized on a straight-line basis over time.
Short-term service contracts (≤ 90 days) may follow the Completed Service Contract Method instead of POCM.
- Recognition of Other Revenue
Interest: Recognized on an accrual basis, except for interest on tax refunds, which is recognized on receipt basis.
Royalty: Recognized as per the terms of the agreement or on another systematic basis, if more appropriate.
Dividend: Recognised in the year of declaration or payment, as per Section 8 of the Income-tax Act.
- Disclosures inForm 3CD
Revenue not recognized due to uncertainty in collection.
Revenue recognized from service transactions.
Method used to determine the stage of completion of services.
Costs incurred, profits recognized, advances received, and retentions for contracts in progress.