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Exposure Draft of Accounting Standard (AS) 11, Construction Contracts (Comments to be received
January, 07th 2019
                                         ED/AS11/2019/06

               Exposure Draft


         Accounting Standard (AS) 11
            Construction Contracts

 Last date for the comments: February 4, 2019




                   Issued by
          Accounting Standards Board
The Institute of Chartered Accountants of India
                                        Exposure Draft

                  Accounting Standard (AS) 11, Construction Contracts
(The Indian Accounting Standards (Ind AS), as notified by the Ministry of Corporate Affairs in
February, 2015, have been applicable to the specified class of companies. Accounting Standards
are applicable to entities other than those to whom Ind AS are applicable. However, the Ministry
of Corporate Affairs has requested the Accounting Standards Board of the Institute of Chartered
Accountants of India (ICAI) to update Accounting Standards, as notified under Companies
(Accounting Standards) Rules, 2006, to bring them nearer to Indian Accounting Standards.
Accordingly, the Accounting Standards Board, ICAI, initiated to update these standards which
will be applicable to all entities to whom Ind AS are not applicable. While formulating these
Accounting Standards, the Accounting Standards Board, ICAI, decided to maintain the
consistency with the paragraph numbers and with the numbering of Standards of the Indian
Accounting Standards.)

As per the Approach Paper for upgradation of existing Accounting Standards to bring them
nearer to the Ind AS as finalised by the ICAI, AS on Construction Contracts, and Revenue
Recognition, corresponding to Ind AS 11, Construction Contracts, and Ind AS 18, Revenue,
respectively have been upgraded and AS corresponding to Ind AS 115 has not been formulated.
In this direction, following is the Exposure Draft of the updated Accounting Standard (AS) 11,
Construction Contracts, issued by the Accounting Standards Board of the ICAI, for comments.
Major differences between draft AS 11 and Ind AS 11 are given in Appendix 1 of draft AS 11.
Similarly, major differences between draft AS 11 and AS 7 are given in Appendix 2 of draft AS
11. Comments are most helpful if they indicate the specific paragraph or group of paragraphs to
which they relate, contain a clear rationale and, where applicable, provide a suggestion for
alternative wording.

Comments can be submitted using one of the following methods so as to receive not later than
February 4, 2019.

Electronically:     click on http://www.icai.org/comments/asb/ to submit comments
                    online

Email:              Comments can be sent at commentsasb@icai.in

Postal:             Secretary, Accounting Standards Board,
                    The Institute of Chartered Accountants of India,
                    ICAI Bhawan, Post Box No. 7100,
                    Indraprastha Marg, New Delhi ­ 110 002


Further clarifications on any aspect of this Exposure Draft may be sought by e-mail to
asb@icai.in.
[This Accounting Standard includes paragraphs set in bold type and plain type, which have equal
authority. Paragraphs in bold type indicate the main principles.]

Objective

The objective of this Standard is to prescribe the accounting treatment of revenue and costs
associated with construction contracts. Because of the nature of the activity undertaken in
construction contracts, the date at which the contract activity is entered into and the date when the
activity is completed usually fall into different accounting periods. Therefore, the primary issue
in accounting for construction contracts is the allocation of contract revenue and contract costs to
the accounting periods in which construction work is performed. This Standard uses the
recognition criteria established in the Framework for the Preparation and Presentation of
Financial Statements issued by ICAI to determine when contract revenue and contract costs
shall be recognised as revenue and expenses in the statement of profit and loss. It also provides
practical guidance on the application of these criteria.

Scope

1.    This Standard s h a l l be applied in accounting for construction contracts in the
      financial statements of contractors. It does not apply to real estate contracts1.

1A.    The impairment of any contractual right to receive cash or another financial asset arising
       from this Standard shall be dealt in accordance with AS 109, Financial Instruments.

2.     [Refer Appendix 1]

Definitions

3.    The following terms are used in this Standard with the meanings specified:

       A construction contract is a contract specifically negotiated for the construction of
       an asset or a combination of assets that are closely interrelated or interdependent in
       terms of their design, technology and function or their ultimate purpose or use.

       A fixed price contract is a construction contract in which the contractor agrees to
       a fixed contract price, or a fixed rate per unit of output, which in some cases is
       subject to cost escalation clauses.

       A cost plus contract is a construction contract in which the contractor is reimbursed for
       allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee.


1
 For real estate developers, revenue shall be accounted for in accordance with the Guidance Note on the subject
being issued by the Institute of Chartered Accountants of India.
      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 such as sales taxes, goods and
      services taxes and value added taxes. The consideration promised in a contract with a
      customer may include fixed amounts, variable amounts, or both
4.   A construction contract may be negotiated for the construction of a single asset such as a
      bridge, building, dam, pipeline, road, ship or tunnel. A construction contract may also deal
      with the construction of a number of assets which are closely interrelated or interdependent
      in terms of their design, technology and function or their ultimate purpose or use; examples
      of such contracts include those for the construction of refineries and other complex pieces of
      plant or equipment.

5.   For the purposes of this Standard, construction contracts include:

     (a)    contracts for the rendering of services which are directly related to the construction of
            the asset, for example, those for the services of project managers and architects; and

     (b)    contracts for destruction or restoration of assets, and the restoration of the environment
            following the demolition of assets.

6.    Construction contracts are formulated in a number of ways which, for the purposes of this
      Standard, are classified as fixed price contracts and cost plus contracts. Some construction
      contracts may contain characteristics of both a fixed price contract and a cost plus contract,
      for example, in the case of a cost plus contract with an agreed maximum price. In such
      circumstances, a contractor needs to consider all the conditions in paragraphs 23 and 24 in
      order to determine when to recognise contract revenue and expenses.

Combining and Segmenting Construction Contracts

7.    The requirements of this Standard are usually applied separately to each construction
      contract. However, in certain circumstances, it is necessary to apply the Standard to the
      separately identifiable components of a single contract or to a group of contracts together in
      order to reflect the substance of a contract or a group of contracts.

8.    When a contract covers a number of assets, the construction of each asset shall be
      treated as a separate construction contract when:

     (a)   separate proposals have been submitted for each asset;

     (b)   each asset has been subject to separate negotiation and the contractor and
           customer have been able to accept or reject that part of the contract relating to
           each asset; and

     (c)   the costs and revenues of each asset can be identified.
9.    A group of contracts, whether with a single customer or with several customers, shall
      be treated as a single construction contract when:

      (a)    the group of contracts is negotiated as a single package;

      (b)     the contracts are so closely interrelated that they are, in effect, part of a single
              project with an overall profit margin; and

      (c)     the contracts are performed concurrently or in a continuous sequence.

10. A contract may provide for the construction of an additional asset at the option of the
     customer or may be amended to include the construction of an additional asset. The
     construction of the additional asset shall be treated as a separate construction
     contract when:

       (a)     the asset differs significantly in design, technology or function from the asset or
             assets covered by the original contract; or

       (b) the price of the asset is negotiated without regard to the original contract price.






Contract revenue

11.    Contract revenue shall comprise:

      (a)    the initial amount of revenue agreed in the contract; and

      (b)     variations in contract work, claims and incentive payments:

             (i)   to the extent that it is probable that they will result in revenue; and

             (ii) they are capable of being reliably measured.

12. Contract revenue is normally measured at transaction price. The measurement of contract
       revenue is affected by a variety of uncertainties that depend on the outcome of future
       events. The estimates often need to be revised as events occur and uncertainties are
       resolved. Therefore, the amount of contract revenue may increase or decrease from one
       period to the next. For example:
       (a)   a contractor and a customer may agree to variations or claims that increase or
             decrease contract revenue in a period subsequent to that in which the contract
             was initially agreed;

            (b)    the amount of revenue agreed in a fixed price contract may increase as a result of
                   cost escalation clauses;

            (c)    the amount of contract revenue may decrease as a result of penalties arising from
                 delays caused by the contractor in the completion of the contract; or

        (d)      when a fixed price contract involves a fixed price per unit of output, contract
                 revenue increases as the number of units is increased.

13.   A variation is an instruction by the customer for a change in the scope of the work to be
       performed under the contract. A variation may lead to an increase or a decrease in
       contract revenue. Examples of variations are changes in the specifications or design of
       the asset and changes in the duration of the contract. A variation is included in contract
       revenue when:

       (a)     it is probable that the customer will approve the variation and the amount of
               revenue arising from the variation; and

       (b)    the amount of revenue can be reliably measured.

14. A claim is an amount that the contractor seeks to collect from the customer or another
     party as reimbursement for costs not included in the contract price. A claim may arise
     from, for example, customer caused delays, errors in specifications or design, and disputed
     variations in contract work. The measurement of the amounts of revenue arising from
     claims is subject to a high level of uncertainty and often depends on the outcome of
     negotiations. Therefore, claims are included in contract revenue only when:

       (a) negotiations have reached an advanced stage such that it is probable that the customer
            will accept the claim; and

       (b)      the amount that it is probable will be accepted by the customer can be measured
               reliably.

15. Incentive payments are additional amounts payable to the contractor if specified
      performance standards are met or exceeded. For example, a contract may allow for an
      incentive payment to the contractor for early completion of the contract. Incentive
      payments are included in contract revenue when:

       (a)     the contract is sufficiently advanced that it is probable that the specified
               performance standards will be met or exceeded; and

       (b) the amount of the incentive payment can be measured reliably.
Contract Costs

16.   Contract costs shall comprise:

      (a)     costs that relate directly to the specific contract;

      (b)     costs that are attributable to contract activity in general and can be allocated
             to the contract; and

      (c)    such other costs as are specifically chargeable to the customer under the terms
             of the contract.

17.    Costs that relate directly to a specific contract include:
      (a)   site labour costs, including site supervision;

      (b) costs of materials used in construction;

      (c) depreciation of plant and equipment used on the contract;

      (d)   costs of moving plant, equipment and materials to and from the contract site;

      (e)   costs of hiring plant and equipment;

      (f)   costs of design and technical assistance that is directly related to the contract;

      (g)    the estimated costs of rectification and guarantee work, including expected warranty
            costs; and

      (h)   claims from third parties.

      These costs may be reduced by any incidental income that is not included in contract
      revenue, for example income from the sale of surplus materials and the disposal of plant
      and equipment at the end of the contract.

18. Costs that may be attributable to contract activity in general and can be allocated to specific
      contracts include:

      (a)   insurance;

      (b) costs of design and technical assistance that are not directly related to a specific
          contract; and

      (c)   construction overheads.

      Such costs are allocated using methods that are systematic and rational and are applied
      consistently to all costs having similar characteristics. The allocation is based on the
      normal level of construction activity. Construction overheads include costs such as the
      preparation and processing of construction personnel payroll. Costs that may be
      attributable to contract activity in general and can be allocated to specific contracts also
      include borrowing costs as per Accounting Standard (AS) 23, Borrowing Costs.

19.   Costs that are specifically chargeable to the customer under the terms of the contract may
      include some general administration costs and development costs for which
      reimbursement is specified in the terms of the contract.

20.   Costs that cannot be attributed to contract activity or cannot be allocated to a contract are
      excluded from the costs of a construction contract. Such costs include:

      (a) general administration costs for which reimbursement is not specified in the
          contract;

      (b)   selling costs;

      (c) research and development costs for which reimbursement is not specified in the
          contract; and

      (d) depreciation of idle plant and equipment that is not used on a particular contract.

21. Contract costs include the costs attributable to a contract for the period from the date of
     securing the contract to the final completion of the contract. However, costs that relate
     directly to a contract and are incurred in securing the contract are also included as part of
     the contract costs if they can be separately identified and measured reliably and it is
     probable that the contract will be obtained. When costs incurred in securing a contract are
     recognised as an expense in the period in which they are incurred, they are not included in
     contract costs when the contract is obtained in a subsequent period.

Recognition of Contract Revenue and Expenses

22.   When the outcome of a construction contract can be estimated reliably, contract
      revenue and contract costs associated with the construction contract shall be
      recognised as revenue and expenses respectively by reference to the stage of
      completion of the contract activity at the end of the reporting period. An expected loss
      on the construction contract shall be recognised as an expense immediately in
      accordance with paragraph 36.

23.   In the case of a fixed price contract, the outcome of a construction contract can be
       estimated reliably when all the following conditions are satisfied:

      (a)   total contract revenue can be measured reliably;

      (b) it is probable that the economic benefits associated with the contract will flow
          to the entity;

      (c) both the contract costs to complete the contract and the stage of contract
          completion at the end of the reporting period can be measured reliably; and

      (d) the contract costs attributable to the contract can be clearly identified and
            measured reliably so that actual contract costs incurred can be compared with
            prior estimates.

24.   In the case of a cost plus contract, the outcome of a construction contract can be
      estimated reliably when all the following conditions are satisfied:

      (a) it is probable that the economic benefits associated with the contract will flow
          to the entity; and

      (b) the contract costs attributable to the contract, whether or not specifically
          reimbursable, can be clearly identified and measured reliably.

25.   The recognition of revenue and expenses by reference to the stage of completion of a
      contract is often referred to as the percentage of completion method. Under this method,
      contract revenue is matched with the contract costs incurred in reaching the stage of
      completion, resulting in the reporting of revenue, expenses and profit which can be
      attributed to the proportion of work completed. This method provides useful information
      on the extent of contract activity and performance during a period.

26.   Under the percentage of completion method, contract revenue is recognised as
      revenue in profit or loss in the accounting periods in which the work is performed. Contract
      costs are usually recognised as an expense in profit or loss in the accounting periods in
      which the work to which they relate is performed. However, any expected excess of total
      contract costs over total contract revenue for the contract is recognised as an expense
      immediately in accordance with paragraph 36.

27.   A contractor may have incurred contract costs that relate to future activity on the
      contract. Such contract costs are recognised as an asset provided it is probable that they
      will be recovered. Such costs represent an amount due from the customer and are often
      classified as contract work in progress.

28.   The outcome of a construction contract can only be estimated reliably when it is probable
      that the economic benefits associated with the contract will flow to the entity. However,
      when an uncertainty arises about the collectability of an amount already included in
      contract revenue, and already recognised in profit or loss , the uncollectible amount or the
      amount in respect of which recovery has ceased to be probable is recognised as an
      expense rather than as an adjustment of the amount of contract revenue.

29.   An entity is generally able to make reliable estimates after it has agreed to a contract
      which establishes:

      (a)    each party's enforceable rights regarding the asset to be constructed;

      (b)    the consideration to be exchanged; and
       (c)   the manner and terms of settlement.

       It is also usually necessary for the entity to have an effective internal financial budgeting
       and reporting system. The entity reviews and, when necessary, revises the estimates of
       contract revenue and contract costs as the contract progresses. The need for such
       revisions does not necessarily indicate that the outcome of the contract cannot be
       estimated reliably.

30.     The stage of completion of a contract may be determined in a variety of ways. The entity
       uses the method that measures reliably the work performed. Depending on the nature of the
       contract, the methods may include:

       (a)   the proportion that contract costs incurred for work performed upto the reporting
             date bear to the estimated total contract costs; or

       (b)   surveys of work performed; or

       (c)   completion of a physical proportion of the contract work.

       Progress payments and advances received from customers often do not necessarily
       reflect the work performed.

31.    When the stage of completion is determined by reference to the contract costs incurred upto
       the reporting date, only those contract costs that reflect work performed are included in
       costs incurred upto the reporting date. Examples of contract costs which are excluded
       are:

       (a)   contract costs that relate to future activity on the contract, such as costs of
             materials that have been delivered to a contract site or set aside for use in a contract
             but not yet installed, used or applied during contract performance, unless the materials
             have been made specially for the contract; and

       (b)   payments made to subcontractors in advance of work performed under the
             subcontract.

32.   When the outcome of a construction contract cannot be estimated reliably:

       (a)   revenue shall be recognised only to the extent of contract costs incurred of which
             recovery is probable; and

       (b)   contract costs shall be recognised as an expense in the period in which they are
             incurred.

       An expected loss on the construction contract shall be recognised as an expense
       immediately in accordance with paragraph 36.
33.   During the early stages of a contract it is often the case that the outcome of the contract
      cannot be estimated reliably. Nevertheless, it may be probable that the entity will recover
      the contract costs incurred. Therefore, contract revenue is recognised only to the extent of
      costs incurred that are expected to be recoverable. As the outcome of the contract cannot
      be estimated reliably, no profit is recognised. However, even though the outcome of the
      contract cannot be estimated reliably, it may be probable that total contract costs will
      exceed total contract revenue. In such cases, any expected excess of total contract costs
      over total contract revenues for the contract is recognised as an expense immediately in
      accordance with paragraph 36.

34.   Contract costs that are not probable of being recovered are recognised as an expense
      immediately. Examples of circumstances in which the recoverability of contract costs
      incurred may not be probable and in which contract costs may, therefore, need to be
      recognised as an expense immediately include contracts:

       (a) that are not fully enforceable, i.e. , their validity is seriously in question;

       (b)      the completion of which is subject to the outcome of pending litigation or
             legislation;

       (c)   relating to properties that are likely to be condemned or expropriated;

       (d)   where the customer is unable to meet its obligations; or

       (e) where the contractor is unable to complete the contract or otherwise meet its
           obligations under the contract.

35.   When the uncertainties that prevented the outcome of the contract being estimated
      reliably no longer exist, revenue and expenses associated with the construction
      contract shall be recognised in accordance with paragraph 22 rather than in
      accordance with paragraph 32.

Recognition of Expected Losses

36.   When it is probable that total contract costs will exceed total contract revenue, the
      expected loss shall be recognised as an expense immediately.

37.   The amount of such a loss is determined irrespective of:
      (a) whether work has commenced on the contract;

      (b)    the stage of completion of contract activity; or

      (c)    the amount of profits expected to arise on other contracts which are not treated as a
             single construction contract in accordance with paragraph 9.
Changes in Estimates






38.    The percentage of completion method is applied on a cumulative basis in each accounting
       period to the current estimates of contract revenue and contract costs. Therefore, the effect
       of a change in the estimate of contract revenue or contract costs, or the effect of a change
       in the estimate of the outcome of a contract, is accounted for as a change in accounting
       estimate (see Accounting Standard (AS) 8, Accounting Policies, Changes in Accounting
       Estimates and Errors). The changed estimates are used in determination of the amount of
       revenue and expenses recognised in profit or loss in the period in which the change is
       made and in subsequent periods.

Disclosure

39. An entity shall disclose:

       (a) the amount of contract revenue recognised as revenue in the period;

       (b)    the methods used to determine the contract revenue recognised in the period;
             and

       (c)   the methods used to determine the stage of completion of contracts in
             progress.

40. An entity shall disclose the following for contracts in progress at the end of reporting
     period:

       (a)   the aggregate amount of costs incurred and recognised profits (less recognised
             losses) to date;

       (b) the amount of advances received; and

       (c)   the amount of retentions.

41. Retentions are amounts of progress billings that are not paid until the satisfaction of
      conditions specified in the contract for the payment of such amounts or until defects have
      been rectified. Progress billings are amounts billed for work performed on a contract
      whether or not they have been paid by the customer. Advances are amounts received by
      the contractor before the related work is performed.

42. An entity shall present:

       (a)   the gross amount due from customers for contract work as an asset; and

       (b)   the gross amount due to customers for contract work as a liability.
43. The gross amount due from customers for contract work is the net amount of:

       (a)   costs incurred plus recognised profits; less

       (b)   the sum of recognised losses and progress billings

       for all contracts in progress for which costs incurred plus recognised profits (less
       recognised losses) exceeds progress billings.

44.    The gross amount due to customers for contract work is the net amount of:

       (a)   costs incurred plus recognised profits less
       (b)   the sum of recognised losses and progress billings;

        for all contracts in progress for which progress billings exceed costs incurred plus
       recognised profits (less recognised losses).

45.    An entity discloses any contingent liabilities and contingent assets in accordance with
       Accounting Standard (AS) 37, Provisions, Contingent Liabilities and Contingent Assets.
       Contingent liabilities and contingent assets may arise from such items as warranty costs,
       claims, penalties or possible losses.
Illustration
This illustration does not form part of the Accounting Standard. Its purpose is to illustrate the
application of the Accounting Standard to assist in clarifying its meaning.

Disclosure of Accounting Policies
The following are illustrations of accounting policy disclosures:

Revenue from fixed price construction contracts is recognised on the percentage of completion
method, measured by reference to the percentage of labour hours incurred upto the reporting date
to estimated total labour hours for each contract.

Revenue from cost plus contracts is recognised by reference to the recoverable costs incurred
during the period plus the fee earned, measured by the proportion that costs incurred upto the
reporting date bear to the estimated total costs of the contract.

The Determination of Contract Revenue and Expenses

The following illustration illustrates one method of determining the stage of completion of a
contract and the timing of the recognition of contract revenue and expenses (see paragraphs 22 to
35 of the Standard). (Amounts shown hereinbelow are in Rs. lakhs)

A construction contractor has a fixed price contract for Rs. 9,000 to build a bridge. The initial
amount of revenue agreed in the contract is Rs. 9,000. The contractor 's initial estimate of contract
costs is Rs. 8,000. It will take 3 years to build the bridge.

By the end of year 1, the contractor 's estimate of contract costs has increased to Rs. 8,050.

In year 2, the customer approves a variation resulting in an increase in contract revenue of Rs. 200
and estimated additional contract costs of Rs. 150. At the end of year 2, costs incurred include
Rs. 100 for standard materials stored at the site to be used in year 3 to complete the project.

The contractor determines the stage of completion of the contract by calculating the
proportion that contract costs incurred for work performed upto the reporting date bear to the
latest estimated total contract costs. A summary of the financial data during the construction
period is as follows:
                                                                                 (amounts in Rs. Lakhs)

                                                        Year 1          Year 2             Year 3
Initial amount of revenue agreed in contract            9000            90000              9000
Variation                                               ___             200                200
Total contract revenue                                  9000            9200               9200
Contract costs incurred upto the reporting date            2093          6168               8200
Contract costs to complete                                 5957          2032               ___
Total estimated contract costs                             8050          8200               8200
Estimated Profit                                           950           1000               1000
Stage of completion                                        26%           74%                100%

The stage of completion for year 2 (74%) is determined by excluding from contract costs incurred
for work performed upto the reporting date, Rs. 100 of standard materials stored at the site for
use in year 3.

The amounts of revenue, expenses and profit recognised in profit or loss in the three years are as
follows:

                                               Upto the            Recognised             Recognised
                                               Reporting            in prior               in current
                                                 Date                years                    year
Year 1
Revenue (9,000 x.26)                               2,340                 ---                 2,340
Expenses (8,050 x.26)                              2,093                 ---                 2,093
Profit                                              247                  ---                  247
Year 2
Revenue (9,200 x.74)                               6,808                2,340                4,468
Expenses (8,200 x.74)                              6,068                2,093                3,975
Profit                                              740                  247                  493
Year 3
Revenue (9,200 x 1.00)                             9,200                6,808                2,392
Expenses                                           8,200                6,068                2,132
Profit                                             1,000                 740                  260

Contract Disclosures
A contractor has reached the end of its first year of operations. All its contract costs incurred have
been paid for in cash and all its progress billings and advances have been received in cash.
Contract costs incurred for contracts B, C and E include the cost of materials that have been
purchased for the contract but which have not been used in contract performance upto the
reporting date. For contracts B, C and E, the customers have made advances to the contractor for
work not yet performed.

The status of its five contracts in progress at the end of year 1 is as follows:
                                                                                               Contract
                                                                                  (amount in Rs. Lakhs)
                                              A          B         C             D        E      Total
Contract Revenue recognised in               145        520       380           200      55      1,300
accordance with paragraph 22
Contract Expenses recognised in           110        450       350       250     55     1,215
accordance with paragraph 22
Expected Losses recognised in              ---       ---       ---        40     30      70
accordance with paragraph 36
Recognised profits less recognised         35        70        30        (90)    (30)    15
losses
Contract Costs incurred in the period     110        510       450       250     100    1,420
Contract Costs incurred recognised
as contract expenses in the period in
accordance with paragraph 22              110        450       350       250     55     1,215
Contract Costs that relate to future       ---        60       100        ---    45      205
activity recognised as an asset in
accordance with paragraph 27
Contract Revenue (see above)              145        520       380       200     55     1,300
Progress Billings (paragraph 41)          100        520       380       180     55     1,235
Unbilled Contract Revenue                  45         ---       ---       20     ---      65
Advances (paragraph 41)                    ---        80        20        ---    25      125

The amounts to be disclosed in accordance with the Standard are as follows:

Contract revenue recognised as revenue in the period                                    1,300
[paragraph 39(a)]

Contract costs incurred and recognised profits (less recognised losses) upto            1,435
reporting date
[paragraph 40(a)]

Advances received [paragraph 40(b)]                                                       125

Gross amounts due from customers for contract work- presented as an asset in              220
accordance with paragraph 42(a)

Gross amounts due to customers for contract work- presented as an liability in           (20)
accordance with paragraph 42(b)


The amounts to be disclosed in accordance with paragraphs 40(a), 42(a) and 42(b) are
calculated as follows:
                                                                (amount in Rs. Lakhs)
                           A          B         C         D         E         Total
Contract Costs incurred   110        510       450       250       100       1,420
Recognised profits less    35         70        30       (90)      (30)        15
recognised losses
                          145        580       480       160        70       1,435
Progress billings         100        520       380       180        55       1,235
Due from customers         45         60        100        ---       15        220
Due to customers           ---        ---        ---      (20)       ---       (20)

The amount disclosed in accordance with paragraph 40(a) is the same as the amount for the
current period because the disclosures relate to the first year of operation.
Appendix 1
Note: This Appendix is not a part of the Accounting Standard. The purpose of this Appendix is
only to bring out the major differences, if any, between Accounting Standard (AS) 11 and the
corresponding Indian Accounting Standard (Ind AS) 11, Construction Contracts.

Comparison with Ind AS 11, Construction Contracts

1. It is specifically stated in AS 11 that this Standard excludes real estate contracts from its
   scope.

2. AS 11 includes borrowing costs as per AS 23, Borrowing Costs, in the costs that may be
   attributable to contract activity in general and can be allocated to specific contracts, whereas
   Ind AS 11 did not specifically make reference to Ind AS 23.

3. AS 11 requires to recognise contract revenue at transaction price, whereas Ind AS 11
   required that contract revenue shall be measured at fair value of consideration
   received/receivable. (paragraph 12). Accordingly, definition of transaction price has been
   included in AS 11.

4. Appendix A, Service Concession Arrangements, and Appendix B, Service Concession
   Arrangements: Disclosures, of Ind AS 11 which deals with accounting for Service
   Concession Arrangements, i.e., the arrangement where private sector entity (an operator)
   constructs or upgrades the infrastructure to be used to provide the public service and operates
   and maintains that infrastructure for a specified period of time have not been included since it
   was felt that these are not relevant for entities to whom Ind AS are not applicable.

5. An Illustration has been added in AS 11 to illustrate the application of this Standard.

6. Paragraph number 2 appears as `Deleted' in Ind AS 11. In order to maintain consistency with
   paragraph numbers of Ind AS 11, the paragraph number is retain in AS 11.
Appendix 2
Note: This Appendix is not a part of the Accounting Standard. The purpose of this Appendix is
only to bring out the major differences, if any, between Accounting Standard (AS) 11,
Construction Contracts, and Accounting Standard (AS) 7, Construction Contracts.

1. AS 11 requires to recognise contract revenue at transaction price, whereas AS 7 requires that
   contract revenue to be measure at consideration received/receivable. Accordingly, definition
   of transaction price has been included in AS 11.

2. Paragraph 1A has been added in AS 11which provides that the impairment of any contractual
   right to receive cash or another financial asset arising from this Standard shall be dealt in
   accordance with AS 109, Financial Instruments.

3. Aligned the terminology with the upgraded standards, eg., `profit or loss' is used instead of
   `statements of profit and loss' appropriately.

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