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Companies (Indian Accounting Standards) Amendment Rules, 2016
April, 06th 2016


                                       MINISTRY OF CORPORATE AFFAIRS
                                                     NOTIFICATION
                                             New Delhi, the 30th March, 2016
        G.S.R. 365 (E).--In exercise of the powers conferred by section 133 read with section 469 of the Companies
Act, 2013 (18 of 2013) and sub-section (1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central
Government, in consultation with the National Advisory Committee on Accounting Standards, hereby makes the
following rules to amend the Companies (Indian Accounting Standards) Rules, 2015, namely:--
1.   Short title and commencement.-(1) These rules may be called the Companies (Indian Accounting
     Standards) (Amendment) Rules, 2016.
     (2) They shall come into force on the date of their publication in the Official Gazette.
2.   In the Companies (Indian Accounting Standards) Rules, 2015 (hereinafter referred to as the principal rules) in rule
     2, in sub-rule (1), after clause (f), the following clause shall be inserted, namely:-

          `(g)     "Non-Banking Financial Company" means a Non-Banking Financial Company as defined in clause (f)
           of section 45-I of the Reserve Bank of India Act, 1934 and includes Housing Finance Companies, Merchant
           Banking companies, Micro Finance Companies, Mutual Benefit Companies, Venture Capital Fund
           Companies, Stock Broker or Sub-Broker Companies, Nidhi Companies, Chit Companies, Securitisation and
           Reconstruction Companies, Mortgage Guarantee Companies, Pension Fund Companies, Asset Management
           Companies and Core Investment Companies.'.

3.   In the principal rules, in rule 4,-
     (I)       in sub-rule (1),-

           (a) in clause (i), for the words "any company" the words " any company and its holding, subsidiary, joint
           venture or associate company" shall be substituted;

           (b) after clause (iii), the following clauses shall be inserted, namely:-

              " (iv)      Notwithstanding the requirement of clauses (i) to (iii), Non-Banking Financial Companies
                          (NBFCs) shall comply with the Indian Accounting Standards (Ind ASs) in preparation of their
                          financial statements and audit respectively, in the following manner, namely:-
        (a)   The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods
              beginning on or after the 1st April, 2018, with comparatives for the periods ending on 31st March, 2018, or
              thereafter--
                               (A) NBFCs having net worth of rupees five hundred crore or more;
                               (B) holding, subsidiary, joint venture or associate companies of companies covered under
                                   item (A), other than those already covered under clauses (i), (ii) and (iii) of sub-rule (1)
                                   of rule 4.
         (b) The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods
             beginning on or after the 1st April, 2019, with comparatives for the periods ending on 31stMarch, 2019, or
             thereafter--
                               (A) NBFCs whose equity or debt securities are listed or in the process of listing on any
                                   stock exchange in India or outside India and having net worth less than rupees five
                                   hundred crore;
                               (B) NBFCs, that are unlisted companies, having net worth of rupees two-hundred and fifty
                                   crore or more but less than rupees five hundred crore; and
                               (C) holding, subsidiary, joint venture or associate companies of companies covered under
                                   item (A) or item (B) of sub-clause (b), other than those already covered in clauses (i),
                                   (ii) and (iii) of sub-rule (1) or item (B) of sub-clause (a) of clause (iv).
                       Explanation.- For the purposes of clause (iv), if in a group of Companies, some entities apply
                       Accounting Standards specified in the Annexure to the Companies (Accounting Standards) Rules,
                       2006 and others apply accounting standards as specified in the Annexure to these rules, in such
                       cases, for the purpose of individual financial statements, the entities should apply respective
                       standards applicable to them. For preparation of consolidated financial statements, the following
                       conditions are to be followed, namely:-
¹Hkkx IIµ[k.M 3(i)º                                  Hkkjr dk jkti=k % vlk/kj.k                                        47


                      (i) where an NBFC is a parent (at ultimate level or at intermediate level), and prepares
                           consolidated financial statements as per Accounting Standards specified in the Annexure to the
                           Companies (Accounting Standards) Rules, 2006, and its subsidiaries, associates and joint
                           ventures, if covered by clause (i), (ii) and (iii) of sub-rule (1) has to provide the relevant
                           financial statement data in accordance with the accounting policies followed by the parent
                           company for consolidation purposes (until the NBFC is covered under clause (iv) of sub-rule
                           (1);
                      (ii) where a parent is a company covered under clause (i), (ii) and (iii) of sub-rule (1) and has an
                           NBFC subsidiary, associate or a joint venture, the parent has to prepare Ind AS-compliant
                           consolidated financial statements and the NBFC subsidiary, associate and a joint venture has to
                           provide the relevant financial statement data in accordance with the accounting policies
                           followed by the parent company for consolidation purposes (until the NBFC is covered under
                           clause (iv) of sub-rule (1).

               (v) Notwithstanding clauses (i) to (iv), the holding, subsidiary, joint venture or associate companies of
                 Scheduled commercial banks (excluding RRBs) would be required to prepare Ind AS based financial
                 statements for accounting periods beginning from 1st April, 2018 onwards, with comparatives for the
                 periods ending 31st March, 2018 or thereafter:";
         (II) in sub-rule (2), for the words brackets and figure "sub-rule (1)'' the words, brackets and figures "clause (i),
         (ii) and (iii) of sub-rule (1)'', shall be substituted, wherever they occur;

         (III) after sub-rule (2), the following sub-rule shall be inserted, namely:-
        "(2A)    For the purposes of calculation of net worth of Non-Banking Financial Companies covered under clause
                 (iv) of sub-rule (1), the following principles shall apply, namely:-
              (a) the net worth shall be calculated in accordance with the stand-alone financial statements of the NBFCs
                  as on 31st March, 2016 or the first audited financial statements for accounting period which ends after
                  that date;
              (b) for NBFCs which are not in existence on 31st March, 2016 or an existing NBFC falling first time,
                  after 31st March, 2016, the net worth shall be calculated on the basis of the first audited stand-alone
                  financial statements ending after that date, in respect of which it meets the thresholds.
         Explanation.- For the purposes of sub-clause (b), the NBFCs meeting the specified thresholds given in sub-
         clause (b) of clause (iv) of sub-rule (1) for the first time at the end of an accounting year shall apply Indian
         Accounting Standards (Ind ASs) from the immediate next accounting year in the manner specified in sub-
         clause (b) of clause (iv) of sub-rule (1).
         Illustration - (i) The NBFCs meeting threshold for the first time as on 31st March, 2019 shall apply Ind AS for
                            the financial year 2019-20 onwards.
                          (ii) The NBFCs meeting threshold for the first time as on 31st March, 2020 shall apply Ind AS
                           for the financial year 2020-21 onwards and so on.'';
         (IV) in the Explanation to sub-rule (4),-

                (a) after the words, figures and letters `the Indian Accounting Standards (Ind AS) for the accounting
                period beginning on 1stApril, 2016' the words, figures and letters ``or 1stApril, 2018, as the case may be''
                shall be inserted;

                (b) after the words, figures and letters `effective for the financial year ending on 31st March, 2017' the
                words, figures and letters `or 31st March, 2019, as the case may be', shall be inserted;

         (V) in the proviso to sub-rule (5), sub-rule (6) and sub-rule (9), the words `either voluntarily or mandatorily'
         shall be omitted.

4.   for rule 5, the following rule shall be substituted, namely:-

            "(5) The Banking Companies and Insurance Companies shall apply the Ind ASs as notified by the Reserve
                 Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA) respectively. An insurer
                 or insurance company shall however, provide Ind AS compliant financial statement data for the
                 purposes of preparation of consolidated financial statements by its parent or investor or venturer, as
                 required by the parent or investor or venturer to comply with the requirements of these rules.''.
48                                     THE GAZETTE OF INDIA : EXTRAORDINARY                                [PART II--SEC. 3(i)]


5.     In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)" in "Indian
       Accounting Standard (Ind AS) 101", -
       (i) for paragraph 30, the following paragraph shall be substituted, namely:-

             ``30     If an entity uses fair value in its opening Ind AS Balance Sheet as deemed cost for an item of
                    property, plant and equipment or an intangible asset (see paragraphs D5 and D7), the entity's first
                    Ind AS financial statements shall disclose, for each line item in the opening Ind AS Balance Sheet:
                    (a)     the aggregate of those fair values; and
                    (b) the aggregate adjustment to the carrying amounts reported under previous GAAP. '' ;
       (ii) in Appendix D,-
            (a) in paragraph D1, for item (m), the following item shall be substituted, namely:-

                    ``(m) financial assets or intangible assets accounted for in accordance with Appendix A to Ind AS 11
                          Service Concession Arrangements (paragraph D22); '';
            (b) for paragraph D7, the following paragraph shall be substituted, namely:-

                    ``D7 The elections in paragraphs D5 and D6 are also available for:
                      (a)      Omitted*;
                      (b)      intangible assets that meet:
                              (i) the recognition criteria in Ind AS 38 (including reliable measurement of original cost); and
                              (ii) the criteria in Ind AS 38 for revaluation (including the existence of an active market).
                     An entity shall not use these elections for other assets or for liabilities.'';
            (c)     in the opening paragraph of paragraph D22, starting with `A first-time' and ending with `Ind AS 115'
                    and its heading, the following heading and opening paragraph shall be substituted, namely:-

                    ``Financial assets or intangible assets accounted for in accordance with Appendix A, Service
                    Concession Arrangements to Ind AS 11''
                    D22      A first-time adopter may apply the following provisions while applying the Appendix A to Ind
                      AS 11: '';
            (d) Paragraphs D34, D34AA and D35 shall be omitted*;
            (e) after paragraph D35AA, the following paragraph shall be inserted, namely:-

           ``Transfers of Assets from Customers
             D36 An entity shall apply Appendix C of Ind AS 18 prospectively to transfers of assets from customers
                 received on or after the transition date. Earlier application is permitted provided the valuations and other
                 information needed to apply the Appendix to past transfers were obtained at the time those transfers
                 occurred. An entity shall disclose the date from which the Appendix D of Ind AS 18 was applied.'';
       (iii) In Appendix 1,-
             (a) for paragraph 10, the following paragraph shall be substituted namely:-

            ``10. IFRS 9 Financial Instruments is effective from annual period beginning on or after January 1, 2018. As
                   the above said standard is not yet effective consequential amendments due to this standard have not been
                   incorporated in current version of IFRS 1. However, corresponding Ind AS 109, Financial Instruments
                   has been issued with consequential amendments in other Ind ASs including Ind AS 101. Accordingly, its
                   consequential amendments to Ind AS 109 have been incorporated in Ind AS 101. '';
            (b) after paragraph 12, following paragraphs shall be inserted namely;-




*
    Refer Appendix 1
*
    Refer Appendix 1
¹Hkkx IIµ[k.M 3(i)º                                 Hkkjr dk jkti=k % vlk/kj.k                                           49

           ``13. IAS 40, Investment Property permits both cost model and fair value model (except in some
                 situations) for measurement of investment properties after initial recognition. Ind AS 40, Investment
                 Property permits only the cost model. As a consequence, paragraph 30 is amended and paragraph D7
                 (a) is deleted.
           14. Paragraphs D34-D35 deal with Ind AS 115, Revenue from Contracts with Customers. As Ind AS 115 is
                not yet effective, therefore, these paragraphs have not been included in this standard. However, in order
                to maintain consistency with paragraph numbers of IFRS 1, the paragraph numbers are retained in Ind
                AS 101. ''.
6.   In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
     "Indian Accounting Standard (Ind AS) 103", for paragraphs 56, the following paragraph shall be substituted,
     namely:-

         ``56     After initial recognition and until the liability is settled, cancelled or expires, the acquirer shall measure
                  a contingent liability recognised in a business combination at the higher of:

                   (a) the amount that would be recognised in accordance with Ind AS 37; and
                   (b) the amount initially recognised less, if appropriate, cumulative amortisation recognised in
                       accordance with Ind AS 18, Revenue.
                  This requirement does not apply to contracts accounted for in accordance with Ind AS 109. ''.
7.   In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
     "Indian Accounting Standard (Ind AS) 104",
     (i) in paragraph 4, for item (a), the following item shall be substituted, namely:-

           ``(a) product warranties issued directly by a manufacturer, dealer or retailer (see Ind AS 18, Revenue, and
                   Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets). '';

     (ii) in paragraph 4, for item (c), the following item shall be substituted, namely:-

           ``(c) contractual rights or contractual obligations that are contingent on the future use of, or right to use, a
                   non-financial item (for example, some licence fees, royalties, contingent lease payments and similar
                   items), as well as a lessee's residual value guarantee embedded in a finance lease (see Ind AS 17,
                   Leases, Ind AS 18, Revenue, and Ind AS 38, Intangible Assets). '';

     (iii) in Appendix B,-
               (a) in paragraph B7, for item (b), the following item shall be substituted, namely:-

                   ``(b)  If Ind AS 18, Revenue applied, the service provider would recognise revenue by reference to the
                          stage of completion (and subject to other specified criteria). That approach is also acceptable
                          under this Ind AS, which permits the service provider (i) to continue its existing accounting
                          policies for these contracts unless they involve practices prohibited by paragraph 14 and (ii) to
                          improve its accounting policies if so permitted by paragraphs 22­30.'';
                (b) in paragraph B18, for item (h), the following item shall be substituted, namely:-

                   ``(h)   product warranties. Product warranties issued by another party for goods sold by a manufacturer,
                           dealer or retailer are within the scope of this Ind AS. However, product warranties issued
                           directly by a manufacturer, dealer or retailer are outside its scope, because they are within the
                           scope of Ind AS 18 and Ind AS 37.'';
                (c) for paragraph B21, the following paragraph shall be substituted, namely:-

                   ``B21 If the contracts described in paragraph B19 do not create financial assets or financial liabilities,
                         Ind AS 18 applies. Under Ind AS 18, revenue associated with a transaction involving the
                         rendering of services is recognised by reference to the stage of completion of the transaction if
                         the outcome of the transaction can be estimated reliably.''.
50                                 THE GAZETTE OF INDIA : EXTRAORDINARY                                   [PART II--SEC. 3(i)]


8.   In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
     "Indian Accounting Standard (Ind AS) 105", -
     (i) for paragraph 26 and its heading, the following paragraph and its heading shall be substituted, namely:-
         ``Changes to a plan of sale or to a plan of distribution to owners''

         26. If an entity has classified an asset (or disposal group) as held for sale or as held for distribution to
            owners, but the criteria in paragraphs 7­9 (for held for sale) or in paragraph 12A (for held for
            distribution to owners) are no longer met, the entity shall cease to classify the asset (or disposal
            group) as held for sale or held for distribution to owners (respectively). In such cases an entity
            shall follow the guidance in paragraphs 27­29 to account for this change except when paragraph
            26A applies.'';
     (ii) after paragraph 26, following paragraph shall be inserted namely:-

     ``26A. If an entity reclassifies an asset (or disposal group) directly from being held for sale to being
            held for distribution to owners, or directly from being held for distribution to owners to being
            held for sale, then the change in classification is considered a continuation of the original plan of
            disposal. The entity:

             (a)     shall not follow the guidance in paragraphs 27­29 to account for this change. The entity
                     shall apply the classification, presentation and measurement requirements in this Ind AS
                     that are applicable to the new method of disposal.

             (b)     shall measure the non-current asset (or disposal group) by following the requirements in
                     paragraph 15 (if reclassified as held for sale) or 15A (if reclassified as held for distribution
                     to owners) and recognise any reduction or increase in the fair value less costs to sell/costs to
                     distribute of the non-current asset (or disposal group) by following the requirements in
                     paragraphs 20­25.

             (c)     shall not change the date of classification in accordance with paragraphs 8 and 12A. This
                     does not preclude an extension of the period required to complete a sale or a distribution
                     to owners if the conditions in paragraph 9 are met.'';

     (iii) for paragraph 27, the following paragraph shall be substituted, namely:-

        ``27. The entity shall measure a non-current asset (or disposal group) that ceases to be classified as
              held for sale or as held for distribution to owners (or ceases to be included in a disposal group
              classified as held for sale or as held for distribution to owners) at the lower of:
               (a)     its carrying amount before the asset (or disposal group) was classified as held for sale or
                       as held for distribution to owners, adjusted for any depreciation, amortisation or
                       revaluations that would have been recognised had the asset (or disposal group) not
                       been classified as held for sale or as held for distribution to owners, and

               (b)     its recoverable amount at the date of the subsequent decision not to sell or distribute5.'';

     (iv) for paragraph 28, the following paragraph shall be substituted, namely:-
     ``28 The entity shall include any required adjustment to the carrying amount of a non-current asset
            that ceases to be classified as held for sale or as held for distribution to owners in profit or
            loss6 from continuing operations in the period in which the criteria in paragraphs 7­9 or 12A,
            respectively, are no longer met. Financial statements for the periods since classification as held for


5
  If the non-current asset is part of a cash-generating unit, its recoverable amount is the carrying amount that would have been
recognised after the allocation of any impairment loss arising on that cash-generating unit in accordance with Ind AS 36.

6
 Unless the asset is property, plant and equipment or an intangible asset that had been revalued in accordance with Ind AS 16 or Ind
AS 38 before classification as held for sale, in which case the adjustment shall be treated as a revaluation increase or decrease.
¹Hkkx IIµ[k.M 3(i)º                             Hkkjr dk jkti=k % vlk/kj.k                                    51

            sale or as held for distribution to owners shall be amended accordingly if the disposal group or
            non-current asset that ceases to be classified as held for sale or as held for distribution to owners
            is a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint
            venture or an associate. The entity shall present that adjustment in the same caption in the
            statement of profit and loss used to present a gain or loss, if any, recognised in accordance with
            paragraph 37.'';
     (v) for paragraph 29, the following paragraph shall be substituted, namely:-
        ``29 If an entity removes an individual asset or liability from a disposal group classified as held for
              sale, the remaining assets and liabilities of the disposal group to be sold shall continue to be
              measured as a group only if the group meets the criteria in paragraphs 7­9. If an entity
              removes an individual asset or liability from a disposal group classified as held for distribution
              to owners, the remaining assets and liabilities of the disposal group to be distributed shall
              continue to be measured as a group only if the group meets the criteria in paragraph 12A.
              Otherwise, the remaining non-current assets of the group that individually meet the criteria to
              be classified as held for sale (or as held for distribution to owners) shall be measured
              individually at the lower of their carrying amounts and fair values less costs to sell (or costs to
              distribute) at that date. Any non-current assets that do not meet the criteria for held for sale shall
              cease to be classified as held for sale in accordance with paragraph 26. Any non-current assets
              that do not meet the criteria for held for distribution to owners shall cease to be classified as held
              for distribution to owners in accordance with paragraph 26.''.
9.   In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
     "Indian Accounting Standard (Ind AS) 107",-
     (i) for paragraph 5A, the following paragraph shall be substituted, namely:-

         ``5A     The credit risk disclosure requirements in paragraph 35A­35N apply to those rights that Ind AS 18,
                  Revenue specifies are accounted for in accordance with Ind AS 109 for the purposes of recognising
                  impairment gains or losses. Any reference to financial assets or financial instruments in these
                  paragraphs shall include those rights unless otherwise specified'';
     (ii) for paragraph 21, the following paragraph shall be substituted, namely:-

      ``21        In accordance with paragraph 117 of Ind AS 1, Presentation of Financial Statements, an entity
         discloses its significant accounting policies, comprising the measurement basis (or bases) used in
         preparing the financial statements and the other accounting policies used that are relevant to an
         understanding of the financial statements.'';

     (iii) in Appendix B, -
            (a) in paragraph B5, for the opening paragraph starting with `Paragraph 21 requires' and ending with
                 `disclosure may include:', the following paragraph shall be substituted, namely:-
              ``B5 Paragraph 21 requires disclosure of the measurement basis (or bases) used in preparing
                 the financial statements and the other accounting policies used that are relevant to an
                 understanding of the financial statements. For financial instruments, such disclosure may
                 include:'';
            (b) in paragraph B5, for the last paragraph starting with `Paragraph 122 of' and ending with `in the
                 financial statements.' the following paragraph shall be substituted, namely:-

                ``Paragraph 122 of Ind AS 1 also requires entities to disclose, along with its significant
                accounting policies or other notes, the judgements, apart from those involving estimations, that
                management has made in the process of applying the entity's accounting policies and that have
                the most significant effect on the amounts recognised in the financial statements.'';

           (c) for paragraph B30, the following paragraph shall be substituted, namely:-

           ``B30 An entity does not have a continuing involvement in a transferred financial asset if, as
                 part of the transfer, it neither retains any of the contractual rights or obligations inherent in
                 the transferred financial asset nor acquires any new contractual rights or obligations relating
                 to the transferred financial asset. An entity does not have continuing involvement in a
52                                THE GAZETTE OF INDIA : EXTRAORDINARY                               [PART II--SEC. 3(i)]


                    transferred financial asset if it has neither an interest in the future performance of the
                    transferred financial asset nor a responsibility under any circumstances to make payments in
                    respect of the transferred financial asset in the future. The term `payment' in this context does
                    not include cash flows of the transferred financial asset that an entity collects and is
                    required to remit to the transferee.'';

             (d) after paragraph B30, the following paragraph shall be inserted, namely:-

            ``B30A When an entity transfers a financial asset, the entity may retain the right to service that
                   financial asset for a fee that is included in, for example, a servicing contract. The entity
                   assesses the servicing contract in accordance with the guidance in paragraphs 42C and
                   B30 to decide whether the entity has continuing involvement as a result of the servicing
                   contract for the purposes of the disclosure requirements. For example, a servicer will have
                   continuing involvement in the transferred financial asset for the purposes of the disclosure
                   requirements if the servicing fee is dependent on the amount or timing of the cash flows
                   collected from the transferred financial asset. Similarly, a servicer has continuing
                   involvement for the purposes of the disclosure requirements if a fixed fee would not be paid
                   in full because of non-performance of the transferred financial asset. In these examples,
                   the servicer has an interest in the future performance of the transferred financial asset.
                   This assessment is independent of whether the fee to be received is expected to compensate
                   the entity adequately for performing the servicing.'';

       (iv) in Appendix C, for paragraph 2, the following paragraph shall be substituted, namely:-

             ``2.   Appendix A, Service Concession Arrangements, contained in Ind AS 11, Construction Contracts.''.
10. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 109",
    (i) in paragraph 2.1, for item (j), the following item shall be substituted, namely:-

           ``(j)    rights and obligations within the scope of Ind AS 11, Construction Contracts, and Ind AS 18,
           Revenue, that are financial instruments, except for those that Ind AS 11 and Ind AS 18 specify are
           accounted for in accordance with this Standard. '';
       (ii) for paragraph 2.2, the following paragraph shall be substituted, namely:-
           ``2.2      The impairment requirements of this Standard shall be applied to those rights that Ind AS 11
                      and Ind AS 18 specify are accounted for in accordance with this Standard for the purposes of
                      recognising impairment gains or losses. '';

       (iii) in paragraph 4.2.1, in item (c), for sub-item(ii), the following sub-item shall be substituted, namely:-
            ``(ii) the amount initially recognised (see paragraph 5.1.1) less, when appropriate, the cumulative amount
                      of income recognised in accordance with the principles of Ind AS 18.'';

       (iv) in paragraph 4.2.1, in item (d), for sub-item(ii), the following sub-item shall be substituted, namely:-
            ``(ii) the amount initially recognised (see paragraph 5.1.1) less, when appropriate, the cumulative
                     amount of income recognised in accordance with the principles of Ind AS 18. '';

       (v) for paragraph 5.1.1, the following paragraph shall be substituted, namely:-
           ``5.1.1. At initial recognition, an entity shall measure a financial asset or financial liability at its fair
                     value plus or minus, in the case of a financial asset or financial liability not at fair value
                     through profit or loss, transaction costs that are directly attributable to the acquisition or issue
                     of the financial asset or financial liability. '';

       (vi) paragraph 5.1.3 shall be omitted*,



*
    Refer Appendix 1
¹Hkkx IIµ[k.M 3(i)º                                   Hkkjr dk jkti=k % vlk/kj.k                                       53

       (vii) for paragraph 5.5.1, the following paragraph shall be substituted, namely:-

          ``5.5.1        An entity shall recognise a loss allowance for expected credit losses on a financial asset that is
                         measured in accordance with paragraphs 4.1.2 or 4.1.2A, a lease receivable, a loan
                         commitment and a financial guarantee contract to which the impairment requirements apply
                         in accordance with paragraphs 2.1(g), 4.2.1(c) or 4.2.1(d). '';
       (viii) for paragraph 5.5.15, the following paragraph shall be substituted, namely:-

          ``5.5.15       Despite paragraphs 5.5.3 and 5.5.5, an entity shall always measure the loss allowance at an
                         amount equal to lifetime expected credit losses for:

                       (a)     trade receivables or any contractual right to receive cash or another financial asset that
                               result from transactions that are within the scope of Ind AS 11 and Ind AS 18.

                       (b)     lease receivables that result from transactions that are within the scope of Ind AS 17, if
                               the entity chooses as its accounting policy to measure the loss allowance at an amount
                               equal to lifetime expected credit losses. That accounting policy shall be applied to all lease
                               receivables but may be applied separately to finance and operating lease receivables. '';

       (ix) in Appendix A,-
            (a)   the definition of `contract assets' shall be omitted.

            (b)       for the last paragraph, the following paragraph shall be substituted, namely:-


             `` The following terms are defined in paragraph 11 of Ind AS 32, Appendix A of Ind AS 107 or Appendix A
                  of Ind AS 113 and are used in this Standard with the meanings specified in Ind AS 32, Ind AS 107 or Ind
                  AS 113:
                  (a) credit risk;1
                  (b) equity instrument;
                  (c) fair value;
                  (d) financial asset;
                  (e) financial instrument;
                  (f) financial liability .'';
       (x) in Appendix B,
           (a) for paragraph B2.2, the following paragraph shall be substituted, namely:-

                ``B2.2     This Standard does not change the requirements relating to royalty agreements based on the
                volume of sales or service revenues that are accounted for under Ind AS 18, Revenue. '';
            (b) in paragraph B2.5, in item (a), for sub-item(ii), the following sub-item shall be substituted, namely:-

                  ``(ii) the amount initially recognised less, when appropriate, the cumulative amount of income recognised
                         in accordance with Ind AS 18 (see paragraph 4.2.1(c)). '';
            (c)     in paragraph B2.5, for item (c), the following item shall be substituted, namely:-

                  ``(c) If a financial guarantee contract was issued in connection with the sale of goods, the issuer applies
                        Ind AS 18 in determining when it recognises the revenue from the guarantee and from the sale of
                        goods. '';


   1
    This term (as defined in Ind AS107) is used in the requirements for presenting the effects of changes in credit risk on
   liabilities designated as at fair value through profit or loss (see paragraph 5.7.7).
54                                        THE GAZETTE OF INDIA : EXTRAORDINARY                               [PART II--SEC. 3(i)]


             (d) in paragraph B3.2.13, for item (a), the following item shall be substituted, namely:-

                   ``(a) If a guarantee provided by an entity to pay for default losses on a transferred asset prevents the
                         transferred asset from being derecognised to the extent of the continuing involvement, the transferred
                         asset at the date of the transfer is measured at the lower of (i) the carrying amount of the asset and (ii)
                         the maximum amount of the consideration received in the transfer that the entity could be required to
                         repay (`the guarantee amount'). The associated liability is initially measured at the guarantee amount
                         plus the fair value of the guarantee (which is normally the consideration received for the guarantee).
                         Subsequently, the initial fair value of the guarantee is recognised in profit or loss on a time
                         proportion basis (see Ind AS 18) and the carrying value of the asset is reduced by any loss
                         allowance.'';
             (e)         for paragraph B5.4.3, the following paragraph shall be substituted namely:-

                   ``B5.4.3    Fees that are not an integral part of the effective interest rate of a financial instrument and are
                         accounted for in accordance with Ind AS 18 include:
                                (a)      fees charged for servicing a loan;
                                (b)      commitment fees to originate a loan when the loan commitment is not measured in
                                         accordance with paragraph 4.2.1(a) and it is unlikely that a specific lending arrangement
                                         will be entered into; and
                                (c)       loan syndication fees received by an entity that arranges a loan and retains no part of the
                                         loan package for itself (or retains a part at the same effective interest rate for comparable
                                         risk as other participants).'';
       (xi) in Appendix E, for paragraph 2, the following paragraph shall be substituted namely:-
           ``2. Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts. '';

       (xii) in Appendix 1, after paragraph 2, the following paragraph shall be inserted namely:-

          ``3. Following paragraphs deal with Ind AS 115, Revenue from Contracts with Customers. As Ind AS 115 is not
               yet effective, these paragraphs have not been included in this standard. However, in order to maintain
               consistency with paragraph numbers of IFRS 9, the paragraph numbers are retained in Ind AS 109:
                   (i)        Paragraph 5.1.3
                   (ii)       5.5.15 (a)(i)
                   (iii)      5.2.15(a)(ii) '';
11. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in "
    Indian Accounting Standard (Ind AS) 110",-
     (i) in paragraph 4, in item (a), for sub-item (iv), the following sub-item shall be substituted, namely:-

            ``(iv) its ultimate or any intermediate parent produces financial statements that are available for public
                   use and comply with Ind ASs, in which subsidiaries are consolidated or are measured at fair
                   value through profit or loss in accordance with this Ind AS. '';

         (ii)      in paragraph 4, item (b), shall be omitted*;
         (iii)     in paragraph 4, item (c), shall be omitted*;
         (iv)      after paragraph 4, the following paragraphs shall be inserted, namely:-
           ``4A          This Ind AS does not apply to post-employment benefit plans or other long-term employee benefit
                         plans to which Ind AS 19, Employee Benefits, applies.
            4B           A parent that is an investment entity shall not present consolidated financial statements if it is
                         required, in accordance with paragraph 31 of this Ind AS, to measure all of its subsidiaries at fair
                         value through profit or loss.'';

        (v) for paragraph 32 , the following paragraph shall be substituted, namely:-

*
    Refer Appendix 1
*
    Refer Appendix 1
¹Hkkx IIµ[k.M 3(i)º                                 Hkkjr dk jkti=k % vlk/kj.k                                          55

             ``32. Notwithstanding the requirement in paragraph 31, if an investment entity has a subsidiary that is not
                itself an investment entity and whose main purpose and activities are providing services that relate to the
                investment entity's investment activities (see paragraphs B85C­B85E), it shall consolidate that subsidiary
                in accordance with paragraphs 19­26 of this Ind AS and apply the requirements of Ind AS 103 to the
                acquisition of any such subsidiary.'';

      (vi) In Appendix B,-
           (a) for paragraph B85C, the following paragraph shall be substituted, namely:-

                ``B85C      An investment entity may provide investment-related services (eg investment advisory
                      services, investment management, investment support and administrative services), either directly
                      or through a subsidiary, to third parties as well as to its investors, even if those activities are
                      substantial to the entity, subject to the entity continuing to meet the definition of an investment
                      entity.'';

             (b) for paragraph B85E, the following paragraph shall be substituted namely:-

                ``B85E      If an investment entity has a subsidiary that is not itself an investment entity and whose main
                      purpose and activities are providing investment-related services or activities that relate to the
                      investment entity's investment activities, such as those described in paragraphs B85C­B85D, to
                      the entity or other parties, it shall consolidate that subsidiary in accordance with paragraph 32. If
                      the subsidiary that provides the investment-related services or activities is itself an investment
                      entity, the investment entity parent shall measure that subsidiary at fair value through profit or loss
                      in accordance with paragraph 31.'';

      (vii) in Appendix 1, after paragraph 3, following paragraph shall be inserted, namely:-

      ``4.     Following paragraph numbers appear as `Deleted' in IFRS 10. In order to maintain consistency with
               paragraph numbers of IFRS 10, the paragraph numbers are retained in Ind AS 110:
               (i) Paragraph 4(b)
              (ii) Paragraph 4(c)''.
12. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 112", in paragraph 6, for item (b), the following item shall be substituted,
    namely:-

   ``(b)       an entity's separate financial statements to which Ind AS 27, Separate Financial Statements,
               applies. However:
                  (i)    if an entity has interests in unconsolidated structured entities and prepares separate financial
                         statements as its only financial statements, it shall apply the requirements in paragraphs 24­31
                         when preparing those separate financial statements.

                  (ii)   an investment entity that prepares financial statements in which all of its subsidiaries are
                         measured at fair value through profit or loss in accordance with paragraph 31 of Ind AS 110 shall
                         present the disclosures relating to investment entities required by this Ind AS.''.
13. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", Indian
    Accounting Standard (Ind AS) 115 shall be omitted.
14. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 1",
    (i)    in paragraph 10, for following item(e), the following item shall be substituted namely:-

            ``(e) notes, comprising significant accounting policies and other explanatory information;'';
     (ii)      after paragraph 30, following paragraph shall be inserted, namely:-

             ``30A When applying this and other Ind ASs an entity shall decide, taking into consideration all
                   relevant facts and circumstances, how it aggregates information in the financial statements, which
                   include the notes. An entity shall not reduce the understandability of its financial statements by
56                                  THE GAZETTE OF INDIA : EXTRAORDINARY                              [PART II--SEC. 3(i)]





                     obscuring material information with immaterial information or by aggregating material items that have
                     different natures or functions.'';

     (iii)    for paragraph 31, the following paragraph shall be substituted, namely:-

             ``31    Some Ind ASs specify information that is required to be included in the financial statements, which
                     include the notes. An entity need not provide a specific disclosure required by an Ind AS if the
                     information resulting from that disclosure is not material except when required by law. This is the case
                     even if the Ind AS contains a list of specific requirements or describes them as minimum
                     requirements. An entity shall also consider whether to provide additional disclosures when compliance
                     with the specific requirements in Ind AS is insufficient to enable users of financial statements to
                     understand the impact of particular transactions, other events and conditions on the entity's financial
                     position and financial performance.'';

     (iv)     for paragraph 34, the following paragraph shall be substituted, namely:-

             ``34    Ind AS 18, Revenue, defines revenue and requires an entity to measure it at the fair value of the
                     consideration received or receivable, taking into account the amount of any trade discounts and volume
                     rebates the entity allows. An entity undertakes, in the course of its ordinary activities, other
                     transactions that do not generate revenue but are incidental to the main revenue-generating activities.
                     An entity presents the results of such transactions, when this presentation reflects the substance of the
                     transaction or other event, by netting any income with related expenses arising on the same transaction.
                     For example:

                     (a) an entity presents gains and losses on the disposal of non-current assets, including investments and
                         operating assets, by deducting from the proceeds on disposal the carrying amount of the asset and
                         related selling expenses; and

                     (b) an entity may net expenditure related to a provision that is recognised in accordance with Ind AS
                         37, Provisions, Contingent Liabilities and Contingent Assets, and reimbursed under a contractual
                         arrangement with a third party (for example, a supplier's warranty agreement) against the related
                         reimbursement. '';

     (v)      in paragraph 54, for the opening paragraph opening with `As a minimum, the' and ending with
              `following amounts:', the following paragraph shall be substituted, namely:-

              ``54     The balance sheet shall include line items that present the following amounts:'';

     (vi)     for paragraph 55, the following paragraph shall be substituted, namely:-

        ``55 An entity shall present additional line items (including by disaggregating the line items listed in
             paragraph 54), headings and subtotals in the balance sheet when such presentation is relevant to an
             understanding of the entity's financial position.'';
     (vii)    after paragraph 55, the following paragraph shall be inserted, namely:-

       ``55A        When an entity presents subtotals in accordance with paragraph 55, those subtotals shall:

             (a) be comprised of line items made up of amounts recognised and measured in accordance with Ind AS;

             (b) be presented and labelled in a manner that makes the line items that constitute the subtotal clear and
                 understandable;

             (c) be consistent from period to period, in accordance with paragraph 45; and
             (d) not be displayed with more prominence than the subtotals and totals required in Ind AS for the balance
                 sheet.'';

     (viii) for paragraph 82A, the following paragraph shall be substituted, namely:-
¹Hkkx IIµ[k.M 3(i)º                                     Hkkjr dk jkti=k % vlk/kj.k                                          57

       ``82A The other comprehensive income section shall present line items for the amounts for the period of:
                     (a)     items of other comprehensive income (excluding amounts in paragraph (b)), classified by
                             nature and grouped into those that, in accordance with other Ind ASs:
                            (i) will not be reclassified subsequently to profit or loss; and
                            (ii) will be reclassified subsequently to profit or loss when specific conditions are met.
                     (b)     the share of the other comprehensive income of associates and joint ventures accounted for
                             using the equity method, separated into the share of items that, in accordance with other Ind
                             ASs:
                            (i) will not be reclassified subsequently to profit or loss; and
                            (ii) will be reclassified subsequently to profit or loss when specific conditions are met.'';
     (ix)     for paragraph 85, the following paragraph shall be substituted, namely:-

        ``85 An entity shall present additional line items (including by disaggregating the line items listed in
             paragraph 82), headings and subtotals in the statement of profit and loss, when such presentation is
             relevant to an understanding of the entity's financial performance.'';
     (x)      after paragraph 85, the following paragraphs shall be inserted, namely:-

       ``85A When an entity presents subtotals in accordance with paragraph 85, those subtotals shall:

              (a)      be comprised of line items made up of amounts recognised and measured in accordance with Ind AS;

              (b) be presented and labelled in a manner that makes the line items that constitute the subtotal clear and
                  understandable;

              (c)      be consistent from period to period, in accordance with paragraph 45; and

              (d) not be displayed with more prominence than the subtotals and totals required in Ind AS for the
                  statement of profit and loss.

           85B An entity shall present the line items in the statement of profit and loss that reconcile any subtotals
               presented in accordance with paragraph 85 with the subtotals or totals required in Ind AS for such
               statement.'';

     (xi)     for paragraph 113, the following paragraph shall be substituted, namely:-

            ``113 An entity shall present notes in a systematic manner. In determining a systematic manner, the
                  entity shall consider the effect on the understandability and comparability of its financial
                  statements. An entity shall cross-reference each item in the balance sheet and in the statement of
                  profit and loss, and in the statements of changes in equity and of cash flows to any related
                  information in the notes.'';
     (xii) for paragraph 114, the following paragraph shall be substituted, namely:-
        ``114 Examples of systematic ordering or grouping of the notes include:
            (a) giving prominence to the areas of its activities that the entity considers to be most relevant
                  to an understanding of its financial performance and financial position, such as grouping
                  together information about particular operating activities;

               (b)         grouping together information about items measured similarly such as assets measured at
                           fair value; or

               (c)         following the order of the line items in the statement of profit and loss and the balance
                           sheet, such as:

                           (i)    statement of compliance with Ind ASs (see paragraph 16);
                           (ii)   significant accounting policies applied (see paragraph 117);
                           (iii) supporting information for items presented in the balance sheet and in the statement
58                                     THE GAZETTE OF INDIA : EXTRAORDINARY                         [PART II--SEC. 3(i)]


                                 of profit and loss, and in the statements of changes in equity and of cash flows, in
                                 the order in which each statement and each line item is presented; and

                           (iv) other disclosures, including:
                               (1) contingent liabilities (see Ind AS 37) and unrecognised contractual commitments; and
                               (2) non-financial disclosures, eg the entity's financial risk management objectives
                                   and policies (see Ind AS 107).'';

       (xiii) paragraph 115 shall be omitted*;
       (xiv) for paragraph 117, the following paragraph shall be substituted, namely:-

           ``117     An entity shall disclose its significant accounting policies comprising:

                 (a) the measurement basis (or bases) used in preparing the financial statements; and

                 (b) the other accounting policies used that are relevant to an understanding of the financial
                     statements.'';
       (xv) for paragraph 119, the following paragraph shall be substituted, namely:-
         ``119 In deciding whether a particular accounting policy should be disclosed, management considers
             whether disclosure would assist users in understanding how transactions, other events and
             conditions are reflected in reported financial performance and financial position. Each entity
             considers the nature of its operations and the policies that the users of its financial statements
             w o u l d expect to be disclosed for that type of entity. Disclosure of particular accounting policies is
             especially useful to users when those policies are selected from alternatives allowed in Ind ASs. An
             example is disclosure of a regular way purchase or sale of financial assets using either trade date
             accounting or settlement date accounting (see Ind AS 109, Fi nancial Instrume nts ). Some Ind ASs
             specifically require disclosure of particular accounting policies, including choices made by
             management between different policies they allow. For example, Ind AS 16 requires disclosure of
             the measurement bases used for classes of property, plant and equipment.'';

       (xvi) paragraph 120 shall be omitted*;

       (xvii) for paragraph 122, the following shall be substituted, namely:-

         ``122 An entity shall disclose, along with its significant accounting policies or other notes, the
               judgements, apart from those involving estimations (see paragraph 125), that management has
               made in the process of applying the entity's accounting policies and that have the most
               significant effect on the amounts recognised in the financial statements.'';
       (xviii) in Appendix 1, for paragraph 6, following paragraph shall be substituted, namely:-

          ``6.     Following paragraph numbers appear as `Deleted' in IAS 1. In order to maintain consistency with
                   paragraph numbers of IAS 1, the paragraph numbers are retained in Ind AS 1.
                   (i)       paragraph 12
                   (ii)      paragraphs 39-40
                   (iii)     paragraph 81
                   (iv)       paragraph 82(e)
                   (v)       paragraphs 82(f)-(i)
                   (vi)      paragraphs 83-84
                   (vii) paragraph 106(c)


*
    Refer Appendix 1
*
    Refer Appendix 1
¹Hkkx IIµ[k.M 3(i)º                                     Hkkjr dk jkti=k % vlk/kj.k                                          59

                      (viii) paragraph 123(a)
                      (ix)   paragraph 115
                      (x)    paragraph 120'';
15. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 2", -
    (i)    in paragraph 2, for item (a), the following item shall be substituted, namely:-

              ``(a) work in progress arising under construction contracts, including directly related service contracts
                    (see Ind AS 11, Construction Contracts);'';
     (ii)          for paragraph 8, the following paragraph shall be substituted, namely:-

            ``8.      Inventories encompass goods purchased and held for resale including, for example, merchandise
                      purchased by a retailer and held for resale, or land and other property held for resale. Inventories also
                      encompass finished goods produced, or work in progress being produced, by the entity and include
                      materials and supplies awaiting use in the production process. In the case of a service provider,
                      inventories include the costs of the service, as described in paragraph 19, for which the entity has not yet
                      recognised the related revenue (see Ind AS 18, Revenue). '';

     (iii)         for paragraph 19, the following paragraph shall be substituted, namely:-

            ``19. To the extent that service providers have inventories, they measure them at the costs of their production.
                  These costs consist primarily of the labour and other costs of personnel directly engaged in
                      providing the service, including supervisory personnel, and attributable overheads. Labour and other
                      costs relating to sales and general administrative personnel are not included but are recognised as
                      expenses in the period in which they are incurred. The cost of inventories of a service provider does not
                      include profit margins or non-attributable overheads that are often factored into prices charged by service
                      providers.'';

     (iv)          for paragraph 29, the following paragraph shall be substituted, namely:-

             ``29. Inventories are usually written down to net realisable value item by item. In some circumstances,
                      however, it may be appropriate to group similar or related items. This may be the case with items of
                      inventory relating to the same product line that have similar purposes or end uses, are produced and
                      marketed in the same geographical area, and cannot be practicably evaluated separately from other items
                      in that product line. It is not appropriate to write inventories down on the basis of a classification of
                      inventory, for example, finished goods, or all the inventories in a particular operating segment. Service
                      providers generally accumulate costs in respect of each service for which a separate selling price is
                      charged. Therefore, each such service is treated as a separate item. '';

     (v)           for paragraph 37, the following paragraph shall be substituted, namely:-

             ``37. Information about the carrying amounts held in different classifications of inventories and the extent of
                      the changes in these assets is useful to financial statement users. Common classifications of inventories
                      are merchandise, production supplies, materials, work in progress and finished goods. The inventories of
                      a service provider may be described as work in progress. '';

     (vi)          in Appendix 1, paragraph 2 shall be omitted.

16. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", after
    Indian Accounting Standard (Ind AS) 10, the following Indian Accounting Standard shall be inserted, namely:-

                                          ``Indian Accounting Standard (Ind AS) 11
                                                     Construction Contracts
(This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority.
Paragraphs in bold type indicate the main principles.)
60                                THE GAZETTE OF INDIA : EXTRAORDINARY                                [PART II--SEC. 3(i)]



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 the Institute of
Chartered Accountants of India to determine when contract revenue and contract costs should 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 shall be applied in accounting for construction contracts in the financial statements of
          contractors.
1A        The impairment of any contractual right to receive cash or another financial asset arising from this Standard
          shall be dealt in accordance with Ind AS 109, Financial Instruments.
          *
2.
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.
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 the 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.


*
    Refer Appendix 1
¹Hkkx IIµ[k.M 3(i)º                               Hkkjr dk jkti=k % vlk/kj.k                                         61

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 measured at the fair value of the consideration received or receivable. 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 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 paid 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.
62                             THE GAZETTE OF INDIA : EXTRAORDINARY                                [PART II--SEC. 3(i)]



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.
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.
¹Hkkx IIµ[k.M 3(i)º                                Hkkjr dk jkti=k % vlk/kj.k                                          63

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
         collectibility 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 to date bear to the estimated total contract
               costs;
         (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 reflect the work performed.
31.      When the stage of completion is determined by reference to the contract costs incurred to date, only those
         contract costs that reflect work performed are included in costs incurred to date. Examples of contract costs
         which are excluded are:
64                              THE GAZETTE OF INDIA : EXTRAORDINARY                              [PART II--SEC. 3(i)]


       (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 that it is probable will be
             recoverable; 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 revenues. In such cases, 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.
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 need to be recognised as an expense immediately include contracts:
       (a)   that are not fully enforceable, ie 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 Ind AS 8, Accounting Policies, Changes in Accounting Estimates and
       Errors). The changed estimates are used in the 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 each of the following for contracts in progress at the end of the reporting period:
¹Hkkx IIµ[k.M 3(i)º                               Hkkjr dk jkti=k % vlk/kj.k                                           65

         (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 Ind 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.

Appendix A
Service Concession Arrangements
This Appendix is an integral part of Indian Accounting Standard (Ind AS)
Background
1        Infrastructure for public services--such as roads, bridges, tunnels, prisons, hospitals, airports, water distribution
         facilities, energy supply and telecommunication networks--has traditionally been constructed, operated and
         maintained by the public sector and financed through public budget appropriation.
2        In recent times, governments have introduced contractual service arrangements to attract private sector
         participation in the development, financing, operation and maintenance of such infrastructure. The infrastructure
         may already exist, or may be constructed during the period of the service arrangement. An arrangement within
         the scope of this Appendix typically involves a private sector entity (an operator) constructing the infrastructure
         used to provide the public service or upgrading it (for example, by increasing its capacity) and operating and
         maintaining that infrastructure for a specified period of time. The operator is paid for its services over the period
         of the arrangement. The arrangement is governed by a contract that sets out performance standards, mechanisms
         for adjusting prices, and arrangements for arbitrating disputes. Such an arrangement is often described as a
         `build-operate-transfer', a `rehabilitate-operate-transfer' or a `public-to-private' service concession
         arrangement.
3        A feature of these service arrangements is the public service nature of the obligation undertaken by the operator.
         Public policy is for the services related to the infrastructure to be provided to the public, irrespective of the
         identity of the party that operates the services. The service arrangement contractually obliges the operator to
         provide the services to the public on behalf of the public sector entity. Other common features are:
         (a)      the party that grants the service arrangement (the grantor) is a public sector entity, including a
                  governmental body, or a private sector entity to which the responsibility for the service has been
                  devolved.
         (b)       the operator is responsible for at least some of the management of the infrastructure and related services
                   and does not merely act as an agent on behalf of the grantor.
         (c)       the contract sets the initial prices to be levied by the operator and regulates price revisions over the
                   period of the service arrangement.
         (d)       the operator is obliged to hand over the infrastructure to the grantor in a specified condition at the end
                   of the period of the arrangement, for little or no incremental consideration, irrespective of which party
                   initially financed it.


Scope
66                               THE GAZETTE OF INDIA : EXTRAORDINARY                              [PART II--SEC. 3(i)]


4        This Appendix gives guidance on the accounting by operators for public-to-private service concession
         arrangements
5        This Appendix applies to public-to-private service concession arrangements if:
         (a) the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it
             must provide them, and at what price; and
         (b) the grantor controls--through ownership, beneficial entitlement or otherwise--any significant residual
             interest in the infrastructure at the end of the term of the arrangement.
6.      Infrastructure used in a public-to-private service concession arrangement for its entire useful life (whole of life
        assets) is within the scope of this Appendix if the conditions in paragraph 5(a) of this Appendix are met.
        Paragraphs AG1­AG8 of the Application Guidance of this Appendix provide guidance on determining whether,
        and to what extent, public-to-private service concession arrangements are within the scope of this Appendix.
7        This Appendix applies to both:
        (a)     infrastructure that the operator constructs or acquires from a third party for the purpose of the service
                arrangement; and
        (b)     existing infrastructure to which the grantor gives the operator access for the purpose of the service
                arrangement.
8        This Appendix does not specify the accounting for infrastructure that was held and recognised as property, plant
         and equipment by the operator before entering the service arrangement. The derecognition requirements of
         Indian Accounting Standards (as set out in Ind AS 16 ) apply to such infrastructure.
9        This Appendix does not specify the accounting by grantors.
Issues
10       This Appendix sets out general principles on recognising and measuring the obligations and related rights in
         service concession arrangements. Requirements for disclosing information about service concession
         arrangements are in Appendix B to this Indian Accounting Standard. The issues addressed in this Appendix are:
         (a)     treatment of the operator's rights over the infrastructure;
         (b)     recognition and measurement of arrangement consideration;
         (c)     construction or upgrade services;
         (d)     operation services;
         (e)     borrowing costs;
         (f)     subsequent accounting treatment of a financial asset and an intangible asset; and
         (g)     items provided to the operator by the grantor.
Accounting Principles
Treatment of the operator's rights over the infrastructure
11      Infrastructure within the scope of this Appendix shall not be recognised as property, plant and equipment of the
        operator because the contractual service arrangement does not convey the right to control the use of the public
        service infrastructure to the operator. The operator has access to operate the infrastructure to provide the public
        service on behalf of the grantor in accordance with the terms specified in the contract.
Recognition and measurement of arrangement consideration
12       Under the terms of contractual arrangements within the scope of this Appendix, the operator acts as a service
         provider. The operator constructs or upgrades infrastructure (construction or upgrade services) used to provide a
         public service and operates and maintains that infrastructure (operation services) for a specified period of time.
13       The operator shall recognise and measure revenue in accordance with Ind AS 11 and Ind AS 18 for the services
          it performs. If the operator performs more than one service (ie construction or upgrade services and operation
          services) under a single contract or arrangement, consideration received or receivable shall be allocated by
          reference to the relative fair values of the services delivered, when the amounts are separately identifiable. The
          nature of the consideration determines its subsequent accounting treatment. The subsequent accounting for
          consideration received as a financial asset and as an intangible asset is detailed in paragraphs 23­26 below.
Construction or upgrade services
14       The operator shall account for revenue and costs relating to construction or upgrade services in accordance with
          this standard.
Consideration given by the grantor to the operator
15     If the operator provides construction or upgrade services the consideration received or receivable by the operator
         shall be recognized at its fair value. The consideration may be rights to:
         (a)      a financial asset, or
         (b)      an intangible asset.
¹Hkkx IIµ[k.M 3(i)º                                    Hkkjr dk jkti=k % vlk/kj.k                                         67

16      The operator shall recognise a financial asset to the extent that it has an unconditional contractual right to receive
        cash or another financial asset from or at the direction of the grantor for the construction services; the grantor has
        little, if any, discretion to avoid payment, usually because the agreement is enforceable by law. The operator has
        an unconditional right to receive cash if the grantor contractually guarantees to pay the operator (a) specified or
        determinable amounts or (b) the shortfall, if any, between amounts received from users of the public service and
        specified or determinable amounts, even if payment is contingent on the operator ensuring that the infrastructure
        meets specified quality or efficiency requirements.
17      The operator shall recognise an intangible asset to the extent that it receives a right (a licence) to charge users of
        the public service. A right to charge users of the public service is not an unconditional right to receive cash
        because the amounts are contingent on the extent that the public uses the service.
18      If the operator is paid for the construction services partly by a financial asset and partly by an intangible asset it is
        necessary to account separately for each component of the operator's consideration. The consideration received
        or receivable for both components shall be recognised initially at the fair value of the consideration received or
        receivable.
19      The nature of the consideration given by the grantor to the operator shall be determined by reference to the
        contract terms and, when it exists, relevant contract law.
Operation services
20       The operator shall account for revenue and costs relating to operation services in accordance with Ind AS 18.
Contractual obligations to restore the infrastructure to a specified level of serviceability
21       The operator may have contractual obligations it must fulfil as a condition of its licence (a) to maintain the
         infrastructure to a specified level of serviceability or (b) to restore the infrastructure to a specified condition
         before it is handed over to the grantor at the end of the service arrangement. These contractual obligations to
         maintain or restore infrastructure, except for any upgrade element (see paragraph 14 of this Appendix), shall be
         recognised and measured in accordance with Ind AS 37, ie at the best estimate of the expenditure that would be
         required to settle the present obligation at the end of the reporting period.
Borrowing costs incurred by the operator
22       In accordance with Ind AS 23, borrowing costs attributable to the arrangement shall be recognised as an
         expense in the period in which they are incurred unless the operator has a contractual right to receive an
         intangible asset (a right to charge users of the public service). In this case borrowing costs attributable to the
         arrangement shall be capitalised during the construction phase of the arrangement in accordance with that
         Standard.
Financial asset
23       Ind AS 32, Ind AS 107 and Ind AS 109 apply to the financial asset recognised under paragraphs 16 and 18 of
         this Appendix.
24       The amount due from or at the direction of the grantor is accounted for in accordance with Ind AS 109 at:
          (a)     amortised cost;
          (b)     fair value through other comprehensive income; or
          (c)         fair value through profit or loss.
25       If the amount due from the grantor is measured at amortised cost or fair value through other comprehensive
         income, Ind AS 109 requires interest calculated using the effective interest method to be recognised in profit or
         loss.
Intangible asset
26       Ind AS 38 applies to the intangible asset recognised in accordance with paragraphs 17 and 18 of this Appendix.
         Paragraphs 45­47 of Ind AS 38 provide guidance on measuring intangible assets acquired in exchange for a
         non-monetary asset or assets or a combination of monetary and non-monetary assets.
Items provided to the operator by the grantor
27       In accordance with paragraph 11, infrastructure items to which the operator is given access by the grantor for the
         purposes of the service arrangement are not recognised as property, plant and equipment of the operator. The
         grantor may also provide other items to the operator that the operator can keep or deal with as it wishes. If such
         assets form part of the consideration payable by the grantor for the services, they are not government grants as
         defined in Ind AS 20. They are recognised as assets of the operator, measured at fair value on initial recognition.
         The operator shall recognise a liability in respect of unfulfilled obligations it has assumed in exchange for the
         assets.
68                               THE GAZETTE OF INDIA : EXTRAORDINARY                                [PART II--SEC. 3(i)]



Application Guidance on Appendix A
This Application Guidance is an integral part of Appendix A
Scope (paragraph 5 of Appendix A)
AG1      Paragraph 5 of Appendix A specifies that infrastructure is within the scope of the Appendix when the following
         conditions apply:
         (a)     the grantor controls or regulates what services the operator must provide with the infrastructure, to
                 whom it must provide them, and at what price; and
        (b)      the grantor controls--through ownership, beneficial entitlement or otherwise--any significant residual
                 interest in the infrastructure at the end of the term of the arrangement.
AG2      The control or regulation referred to in condition (a) could be by contract or otherwise (such as through a
         regulator), and includes circumstances in which the grantor buys all of the output as well as those in which
         some or all of the output is bought by other users. In applying this condition, the grantor and any related parties
         shall be considered together. If the grantor is a public sector entity, the public sector as a whole, together with
         any regulators acting in the public interest, shall be regarded as related to the grantor for the purposes of this
         Appendix A.
AG3      For the purpose of condition (a), the grantor does not need to have complete control of the price: it is sufficient
         for the price to be regulated by the grantor, contract or regulator, for example by a capping mechanism.
         However, the condition shall be applied to the substance of the agreement. Non-substantive features, such as a
         cap that will apply only in remote circumstances, shall be ignored. Conversely, if for example, a contract
         purports to give the operator freedom to set prices, but any excess profit is returned to the grantor, the operator's
         return is capped and the price element of the control test is met.
AG4      For the purpose of condition (b), the grantor's control over any significant residual interest should both restrict
         the operator's practical ability to sell or pledge the infrastructure and give the grantor a continuing right of use
         throughout the period of the arrangement. The residual interest in the infrastructure is the estimated current
         value of the infrastructure as if it were already of the age and in the condition expected at the end of the period
         of the arrangement.
AG5      Control should be distinguished from management. If the grantor retains both the degree of control described in
         paragraph 5(a) of Appendix A and any significant residual interest in the infrastructure, the operator is only
         managing the infrastructure on the grantor's behalf--even though, in many cases, it may have wide managerial
         discretion.
AG6      Conditions (a) and (b) together identify when the infrastructure, including any replacements required (see
         paragraph 21 of Appendix A), is controlled by the grantor for the whole of its economic life. For example, if the
         operator has to replace part of an item of infrastructure during the period of the arrangement (eg the top layer of
         a road or the roof of a building), the item of infrastructure shall be considered as a whole. Thus condition (b) is
         met for the whole of the infrastructure, including the part that is replaced, if the grantor controls any significant
         residual interest in the final replacement of that part.
AG7      Sometimes the use of infrastructure is partly regulated in the manner described in paragraph 5(a) of Appendix A
         and partly unregulated. However, these arrangements take a variety of forms:
         (a)     any infrastructure that is physically separable and capable of being operated independently and meets
                 the definition of a cash-generating unit as defined in Ind AS 36 shall be analysed separately if it is used
                 wholly for unregulated purposes. For example, this might apply to a private wing of a hospital, where
                 the remainder of the hospital is used by the grantor to treat public patients.
        (b)      when purely ancillary activities (such as a hospital shop) are unregulated, the control tests shall be
                 applied as if those services did not exist, because in cases in which the grantor controls the services in
                 the manner described in paragraph 5 of Appendix A, the existence of ancillary activities does not
                 detract from the grantor's control of the infrastructure.
AG8      The operator may have a right to use the separable infrastructure described in paragraph AG7 (a), or the
         facilities used to provide ancillary unregulated services described in paragraph AG7 (b). In either case, there
         may in substance be a lease from the grantor to the operator; if so, it shall be accounted for in accordance with
         Ind AS 17.
Information note 1
Accounting framework for public-to-private service arrangements
This note accompanies, but is not part of, Appendix A
¹Hkkx IIµ[k.M 3(i)º                                    Hkkjr dk jkti=k % vlk/kj.k                                       69



The diagram below summarises the accounting for service arrangements established by Appendix A

 Does the grantor control or regulate what services
 the operator must provide with the infrastructure, to          No                          OUTSIDE THE SCOPE OF
 whom it must provide them, and at what price?                                              APPENDIX     A     SEE
                                                                                            INFORMATION NOTE 2



                            Yes

 Does the grantor control, through ownership,                        No
 beneficial entitlement or otherwise, any significant
 residual interest in the infrastructure at the end of
 the service arrangements? Or is the infrastructure
 used in the arrangements for the entire useful life?                                                  No


                             Yes

                                                                      Is the infrastructure existing
 Is the infrastructure constructed or acquired by          No
 the operator from a third party for the purpose                          infrastructure of the grantor to
 of the service arrangement?
                                                                          which the operator is given access


                                Yes                                             Yes


                                WITHIN THE SCOPE OF APPENDIX A

                       Operator does not recognise infrastructure as property, plant and
                       equipment or as a leased asset.




 Does the operator have a                       Does the operator have a                            OUTSIDE THE SCOPE
 contractual right to receive                   contractual right to charge                         OF APPENDIX A SEE
                                      No                                              No
 cash or other financial                        users of the public services                        PARAGRAPH 27 of
 asset from or at direction                     as described in paragraph                           Appendix A
 of the grantor as described                    17 of Appendix A?
 in    paragraph     16    of
                                               Yes
                      Yes

 Operator       recognises     a                     Operator      recognises     an
 financial asset to the extent                       intangible asset to the extent
 that it has a contractual right                     that it has a contractual right
 to receive cash or another                          to receive an intangible asset
 financial asset as described in                     as described in paragraph 17
 paragraph 16 of Appendix A                          in Appendix A.
 70                                THE GAZETTE OF INDIA : EXTRAORDINARY                                 [PART II--SEC. 3(i)]


 Information note 2
 References to Indian Accounting Standards that apply to typical types of public-to-private
 arrangements
 This note accompanies, but is not part of, Appendix A.
 The table sets out the typical types of arrangements for private sector participation in the provision of public sector
 services and provides references to Indian Accounting Standards that apply to those arrangements. The list of
 arrangements types is not exhaustive. The purpose of the table is to highlight the continuum of arrangements. It is not
 Appendix A's intention to convey the impression that bright lines exist between the accounting requirements for public-
 to-private arrangements

Category          Lessee         Service provider                                    Owner
Typical            Lease (eg      Service and/or       Rehabilitate      Build -     Build - own         100%
arrangement         Operator       maintenance         ­ operate -      operate -     - operate      Divestment/
types                leases          contract            transfer       transfer                     Privatisation/
                   asset from     (specific tasks                                                    Corporation
                    grantor)         eg debt
                                    collection)
Asset                                        Grantor                                             Operator
ownership
Capital                         Grantor                                     Operator
investment
Demand risk          Shared          Grantor           Operator and/or Grantor                 Operator
Typical           8­20 years        1­5 years                              25­30 years                Indefinite
duration                                                                                              (or may be
                                                                                                      limited by
                                                                                                      licence)
Residual                              Grantor                                                  Operator
interest
Relevant           Ind AS 17        Ind AS 18              This Appendix A                    Ind AS 16
Indian
Accounting
Standards




 Appendix B
 Service Concession Arrangements: Disclosures
 This Appendix is an integral part of Indian Accounting Standard (Ind AS) 11.
 Issues
 1.        An entity (the operator) may enter into an arrangement with another entity (the grantor) to provide services that
           give the public access to major economic and social facilities. The grantor may be a public or private sector
           entity, including a governmental body. Examples of service concession arrangements involve water treatment
           and supply facilities, motorways, car parks, tunnels, bridges, airports and telecommunication networks.
           Examples of arrangements that are not service concession arrangements include an entity outsourcing the
           operation of its internal services (eg employee cafeteria, building maintenance, and accounting or information
           technology functions).
 2.        A service concession arrangement generally involves the grantor conveying for the period of the concession to
           the operator:
           (a) the right to provide services that give the public access to major economic and social facilities, and
           (b) in some cases, the right to use specified tangible assets, intangible assets, or financial assets, in exchange for
           the operator:
¹Hkkx IIµ[k.M 3(i)º                                 Hkkjr dk jkti=k % vlk/kj.k                                             71

         (c) committing to provide the services according to certain terms and conditions during the concession period,
         and
         (d) when applicable, committing to return at the end of the concession period the rights received at the
         beginning of the concession period and/or acquired during the concession period.
3.       The common characteristic of all service concession arrangements is that the operator both receives a right and
         incurs an obligation to provide public services.
4.       The issue is what information should be disclosed in the notes in the financial statements of an operator and a
         grantor.
5.       Certain aspects and disclosures relating to some service concession arrangements are addressed by Indian
         Accounting Standards (eg Ind AS 16 applies to acquisitions of items of property, plant and equipment, Ind AS
         17 applies to leases of assets, and Ind AS 38 applies to acquisitions of intangible assets). However, a service
         concession arrangement may involve executory contracts that are not addressed in Indian Accounting Standards,
         unless the contracts are onerous, in which case Ind AS 37 applies. Therefore, this Appendix addresses additional
         disclosures of service concession arrangements.

Accounting Principles
6.       All aspects of a service concession arrangement shall be considered in determining the appropriate disclosures
         in the notes. An operator and a grantor shall disclose the following in each period:
         (a) a description of the arrangement;
         (b) significant terms of the arrangement that may affect the amount, timing and certainty of future cash flows
         (eg the period of the concession, re-pricing dates and the basis upon which re-pricing or re-negotiation is
         determined);
         (c) the nature and extent (eg quantity, time period or amount as appropriate) of:
                  (i) rights to use specified assets;
                  (ii) obligations to provide or rights to expect provision of services;
                  (iii) obligations to acquire or build items of property, plant and equipment;
                  (iv) obligations to deliver or rights to receive specified assets at the end of the concession period;
                  (v) renewal and termination options; and
                  (vi) other rights and obligations (eg major overhauls);
         (d) changes in the arrangement occurring during the period; and
         (d)   how the service arrangement has been classified.
6A   An operator shall disclose the amount of revenue and profits or losses recognized in the period on exchanging
     construction services for a financial asset or an intangible asset.
7 The disclosures required in accordance with paragraph 6 of this Appendix shall be provided individually for each
  service concession arrangement or in aggregate for each class of service concession arrangements. A class is a
  grouping of service concession arrangements involving services of a similar nature (eg toll collections,
  telecommunications and water treatment services).

     Appendix C
     References to matters contained in other Indian Accounting Standards
     This Appendix is an integral part of Indian Accounting Standard (Ind AS) 11.
     This appendix lists the appendices which are part of other Indian Accounting Standards and makes reference to Ind
     AS 11, Construction Contracts.
         1.       Appendix A Intangible Assets--Web Site Costs contained in Ind AS 38, Intangible Assets.

     Appendix 1
     Note:       This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to
     bring out the differences, if any, between Indian Accounting Standard (Ind AS) 11 and the corresponding
     International Accounting Standard (IAS) 11, Construction Contracts, IFRIC 12, Service Concession Arrangements
     and SIC 29, Service Concession Arrangements: Disclosures
72                                 THE GAZETTE OF INDIA : EXTRAORDINARY                               [PART II--SEC. 3(i)]



     Comparison with IAS 11, Construction Contracts, IFRIC 12, Service Concession
     Arrangements and SIC 29, Service Concession Arrangements: Disclosures
       1.          The transitional provisions given in IFRIC 12 have not been given in Ind AS 11, since all transitional
                  provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-
                  time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of
                  International Financial Reporting Standards.

       2.       Different terminology is used in this standard, e.g., the term `balance sheet' is used instead of `Statement of
                  financial position' and `Statement of profit and loss' is used instead of `Statement of comprehensive
                  income'.

       3.         Paragraph 2 of IAS 11 which states that IAS 11 supersedes the earlier version of IAS 11 is deleted in Ind
                  AS 11 as this is not relevant in Ind AS 11. However, paragraph number 2 is retained in Ind AS 11 to
                  maintain consistency with paragraph numbers of IAS 11.''.
17. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 12", in paragraph 59, for item (a), the following item shall be substituted
    namely:-

      ``(a)      Royalty or dividend revenue is received in arrears and is included in accounting profit on a time
                 apportionment basis in accordance with Ind AS 18, Revenue, or Ind AS 109, Financial Instruments, as
                 relevant, but is included in taxable profit (tax loss) on a cash basis; and ''.

18. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 16",-
      (i)   for paragraph 68A, the following paragraph shall be substituted, namely:-


             ``68A However, an entity that, in the course of its ordinary activities, routinely sells items of property, plant
                   and equipment that it has held for rental to others shall transfer such assets to inventories at their
                   carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of
                   such assets shall be recognised as revenue in accordance with Ind AS 18, Revenue. Ind AS 105 does
                   not apply when assets that are held for sale in the ordinary course of business are transferred to
                   inventories.'';
      (ii)       for paragraph 69, the following paragraph shall be substituted, namely:-

              ``69 The disposal of an item of property, plant and equipment may occur in a variety of ways (eg by sale, by
                   entering into a finance lease or by donation). In determining the date of disposal of an item, an entity
                   applies the criteria in Ind AS 18 for recognising revenue from the sale of goods. Ind AS 17 applies to
                   disposal by a sale and leaseback.'';
      (iii)     for paragraph 72, the following paragraph shall be substituted, namely:-

              ``72 The consideration receivable on disposal of an item of property, plant and equipment is recognised
                   initially at its fair value. If payment for the item is deferred, the consideration received is recognised
                   initially at the cash price equivalent. The difference between the nominal amount of the consideration
                   and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting
                   the effective yield on the receivable.'';
      (iv)      in Appendix C,
                (a) for paragraph 1, the following paragraph shall be substituted, namely:-

                   ``1 Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts.'';
                (b) for paragraph 2, the following paragraph shall be substituted, namely:-

                   ``2 Appendix B, Service Concession Arrangements: Disclosures contained in Ind AS 11, Construction
                       Contracts.'';
¹Hkkx IIµ[k.M 3(i)º                                  Hkkjr dk jkti=k % vlk/kj.k                                           73



19. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 17",
     (i)       in Appendix B, in paragraph 8, for opening paragraph starting with `The requirements in' and ending
               with `is inappropriate include:', the following paragraph shall be substituted, namely:-

             ``8. The criteria in paragraph 20 of Ind AS 18, Revenue, shall be applied to the facts and circumstances of
                  each arrangement in determining when to recognise a fee as income that an Entity might receive. Factors
                  such as whether there is continuing involvement in the form of significant future performance obligations
                  necessary to earn the fee, whether there are retained risks, the terms of any guarantee arrangements, and
                  the risk of repayment of the fee, shall be considered. Indicators that individually demonstrate that
                  recognition of the entire fee as income when received, if received at the beginning of the arrangement, is
                  inappropriate include: '';
     (ii)      in Appendix C, in paragraph 4, for item (b), the following item shall be substituted, namely:-

              ``(b) are public-to-private service concession arrangements within the scope of Appendix A of Ind AS 11,
                    Service Concession Arrangements. '';
     (iii)     in Appendix D,
               (a) for paragraph 1, the following paragraph shall be substituted, namely:-

                  ``1   Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts.'';

               (b)   for paragraph 2, the following paragraph shall be substituted, namely:-

                  ``2   Appendix B, Service Concession Arrangements: Disclosures contained in Ind AS 11, Construction
                        Contracts. '';
20. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", after
    Indian Accounting Standard (Ind AS) 17, the following Indian Accounting Standard shall be inserted, namely:-

                                     ``Indian Accounting Standard (Ind AS) 18
                                                           Revenue
(This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority.
Paragraphs in bold type indicate the main principles.)
Objective
            Income is defined in the Framework for the Preparation and Presentation of Financial Statements issued by the
            Institute of Chartered Accountants of India as increases in economic benefits during the accounting period in the
            form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than
            those relating to contributions from equity participants. Income encompasses both revenue and gains. Revenue
            is income that arises in the course of ordinary activities of an entity and is referred to by a variety of different
            names including sales, fees, interest, dividends and royalties. The objective of this Standard is to prescribe the
            accounting treatment of revenue arising from certain types of transactions and events.
            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.
Scope
1           This Standard shall be applied in accounting for revenue arising from the following transactions and
            events2:
            (a) the sale of goods;
            (b) the rendering of services; and
            (c) the use by others of entity assets yielding interest and royalties.



2
  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.
74                                THE GAZETTE OF INDIA : EXTRAORDINARY                              [PART II--SEC. 3(i)]


1A        This Standard deals with recognition of interest. However, the following are dealt in accordance with Ind
          AS 109, Financial Instruments:
         (a) measurement of interest charges for the use of cash or cash equivalents or amounts due to the entity;
             and
         (b) recognition and measurement of dividend.
1B        The impairment of any contractual right to receive cash or another financial asset arising from this
          Standard shall be dealt in accordance with Ind AS 109, Financial Instruments.
          *
2
3         Goods includes goods produced by the entity for the purpose of sale and goods purchased for resale, such as
          merchandise purchased by a retailer or land and other property held for resale.
4         The rendering of services typically involves the performance by the entity of a contractually agreed task over an
          agreed period of time. The services may be rendered within a single period or over more than one period. Some
          contracts for the rendering of services are directly related to construction contracts, for example, those for the
          services of project managers and architects. Revenue arising from these contracts is not dealt with in this
          Standard but is dealt with in accordance with the requirements for construction contracts as specified in Ind
          AS 11 Construction Contracts.
5         The use by others of entity assets gives rise to revenue in the form of:
          (a) interest--charges for the use of cash or cash equivalents or amounts due to the entity;
          (b) royalties--charges for the use of long-term assets of the entity, for example, patents, trademarks, copyrights
                and computer software; and
          (c) dividends--distributions of profits to holders of equity investments in     proportion to their holdings of a
                 particular class of capital.
6         This Standard does not deal with revenue arising from:
          (a)    lease agreements (see Ind AS 17 Leases);
          (b)    dividends arising from investments which are accounted for under the equity method (see Ind AS 28
                 Investments in Associates and Joint Ventures);
          (c)    insurance contracts within the scope of Ind AS 104 Insurance Contracts;
          (d)    changes in the fair value of financial assets and financial liabilities or their disposal (see Ind AS 109
                 Financial Instruments);
          (e)    changes in the value of other current assets;
          (f)    initial recognition and from changes in the fair value of biological assets related to agricultural activity
                 (see Ind AS 41 Agriculture);
          (g)    initial recognition of agricultural produce (see Ind AS 41); and
          (h)    the extraction of mineral ores.
Definitions
7         The following terms are used in this Standard with the meanings specified:
          Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary
          activities of an entity when those inflows result in increases in equity, other than increases relating to
          contributions from equity participants.
          Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
          transaction between market participants at the measurement date.(See Ind AS 113, Fair Value
          Measurement)
8         Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own
          account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value
          added taxes are not economic benefits which flow to the entity and do not result in increases in equity.
          Therefore, they are excluded from revenue. Similarly, in an agency relationship, the gross inflows of economic
          benefits include amounts collected on behalf of the principal and which do not result in increases in equity for
          the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of
          commission.


*
    Refer Appendix 1
¹Hkkx IIµ[k.M 3(i)º                                  Hkkjr dk jkti=k % vlk/kj.k                                          75

Measurement of revenue
9          Revenue shall be measured at the fair value of the consideration received or receivable.3
10         The amount of revenue arising on a transaction is usually determined by agreement between the entity and the
           buyer or user of the asset. It is measured at the fair value of the consideration received or receivable taking into
           account the amount of any trade discounts and volume rebates allowed by the entity.
11         In most cases, the consideration is in the form of cash or cash equivalents and the amount of revenue is the
           amount of cash or cash equivalents received or receivable. However, when the inflow of cash or cash
           equivalents is deferred, the fair value of the consideration may be less than the nominal amount of cash received
           or receivable. For example, an entity may provide interest-free credit to the buyer or accept a note receivable
           bearing a below-market interest rate from the buyer as consideration for the sale of goods. When the
           arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by
           discounting all future receipts using an imputed rate of interest. The imputed rate of interest is the more clearly
           determinable of either:
           (a)    the prevailing rate for a similar instrument of an issuer with a similar credit rating; or
           (b)    a rate of interest that discounts the nominal amount of the instrument to the current cash sales price of the
                  goods or services.
           The difference between the fair value and the nominal amount of the consideration is recognised as interest
           revenue in accordance with Ind AS 109.
12         When goods or services are exchanged or swapped for goods or services which are of a similar nature and value,
           the exchange is not regarded as a transaction which generates revenue. This is often the case with commodities
           like oil or milk where suppliers exchange or swap inventories in various locations to fulfil demand on a timely
           basis in a particular location. When goods are sold or services are rendered in exchange for dissimilar goods or
           services, the exchange is regarded as a transaction which generates revenue. The revenue is measured at the fair
           value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred.
           When the fair value of the goods or services received cannot be measured reliably, the revenue is measured at
           the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents
           transferred.
Identification of the transaction
13         The recognition criteria in this Standard are usually applied separately to each transaction. However, in certain
           circumstances, it is necessary to apply the recognition criteria to the separately identifiable components of a
           single transaction in order to reflect the substance of the transaction. For example, when the selling price of a
           product includes an identifiable amount for subsequent servicing, that amount is deferred and recognised as
           revenue over the period during which the service is performed. Conversely, the recognition criteria are applied
           to two or more transactions together when they are linked in such a way that the commercial effect cannot be
           understood without reference to the series of transactions as a whole. For example, an entity may sell goods and,
           at the same time, enter into a separate agreement to repurchase the goods at a later date, thus negating the
           substantive effect of the transaction; in such a case, the two transactions are dealt with together.
Sale of goods
14         Revenue from the sale of goods shall be recognised when all the following conditions have been satisfied:
           (a)    the entity has transferred to the buyer the significant risks and rewards of ownership of the goods;
           (b)    the entity retains neither continuing managerial involvement to the degree usually associated with
                  ownership nor effective control over the goods sold;
           (c)    the amount of revenue can be measured reliably;
           (d)    it is probable that the economic benefits associated with the transaction will flow to the entity; and
           (e)    the costs incurred or to be incurred in respect of the transaction can be measured reliably.
15         The assessment of when an entity has transferred the significant risks and rewards of ownership to the buyer
           requires an examination of the circumstances of the transaction. In most cases, the transfer of the risks and
           rewards of ownership coincides with the transfer of the legal title or the passing of possession to the buyer. This
           is the case for most retail sales. In other cases, the transfer of risks and rewards of ownership occurs at a
           different time from the transfer of legal title or the passing of possession.



3
    See also Appendix A of this standard, Revenue--Barter Transactions Involving Advertising Services.
76                              THE GAZETTE OF INDIA : EXTRAORDINARY                                [PART II--SEC. 3(i)]


16      If the entity retains significant risks of ownership, the transaction is not a sale and revenue is not recognised. An
        entity may retain a significant risk of ownership in a number of ways. Examples of situations in which the entity
        may retain the significant risks and rewards of ownership are:
        (a) when the entity retains an obligation for unsatisfactory performance not covered by normal warranty
             provisions;
        (b) when the receipt of the revenue from a particular sale is contingent on the derivation of revenue by the
             buyer from its sale of the goods;
        (c) when the goods are shipped subject to installation and the installation is a significant part of the contract
             which has not yet been completed by the entity; and
        (d) when the buyer has the right to rescind the purchase for a reason specified in the sales contract and the
             entity is uncertain about the probability of return.
17      If an entity retains only an insignificant risk of ownership, the transaction is a sale and revenue is recognised.
        For example, a seller may retain the legal title to the goods solely to protect the collectability of the amount due.
        In such a case, if the entity has transferred the significant risks and rewards of ownership, the transaction is a
        sale and revenue is recognised. Another example of an entity retaining only an insignificant risk of ownership
        may be a retail sale when a refund is offered if the customer is not satisfied. Revenue in such cases is recognised
        at the time of sale provided the seller can reliably estimate future returns and recognises a liability for returns
        based on previous experience and other relevant factors.
18      Revenue is recognised only when it is probable that the economic benefits associated with the transaction will
        flow to the entity. In some cases, this may not be probable until the consideration is received or until an
        uncertainty is removed. For example, it may be uncertain that a foreign governmental authority will grant
        permission to remit the consideration from a sale in a foreign country. When the permission is granted, the
        uncertainty is removed and revenue is recognised. However, when an uncertainty arises about the collectability
        of an amount already included in revenue, 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 revenue
        originally recognised.
19      Revenue and expenses that relate to the same transaction or other event are recognised simultaneously; this
        process is commonly referred to as the matching of revenues and expenses. Expenses, including warranties and
        other costs to be incurred after the shipment of the goods can normally be measured reliably when the other
        conditions for the recognition of revenue have been satisfied. However, revenue cannot be recognised when the
        expenses cannot be measured reliably; in such circumstances, any consideration already received for the sale of
        the goods is recognised as a liability.
Rendering of services

20      When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue
        associated with the transaction shall be recognised by reference to the stage of completion of the
        transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably
        when all the following conditions are satisfied:
        (a)    the amount of revenue can be measured reliably;
        (b)    it is probable that the economic benefits associated with the transaction will flow to the entity;
        (c)    the stage of completion of the transaction at the end of the reporting period can be measured
               reliably; and
        (d)    the costs incurred for the transaction and the costs to complete the transaction can be measured
               reliably.4
21      The recognition of revenue by reference to the stage of completion of a transaction is often referred to as the
        percentage of completion method. Under this method, revenue is recognised in the accounting periods in which
        the services are rendered. The recognition of revenue on this basis provides useful information on the extent of
        service activity and performance during a period. Ind AS 11 also requires the recognition of revenue on this
        basis. The requirements of that Standard are generally applicable to the recognition of revenue and the
        associated expenses for a transaction involving the rendering of services.







4
  See also Appendix A of this standard, Revenue--Barter Transactions Involving Advertising Services and Appendix B of
Ind AS 17 , Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
¹Hkkx IIµ[k.M 3(i)º                                Hkkjr dk jkti=k % vlk/kj.k                                          77

22       Revenue is recognised only when it is probable that the economic benefits associated with the transaction will
         flow to the entity. However, when an uncertainty arises about the collectability of an amount already included in
         revenue, 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 revenue originally recognised.
23       An entity is generally able to make reliable estimates after it has agreed to the following with the other parties to
         the transaction:
         (a)    each party's enforceable rights regarding the service to be provided and received by the parties;
         (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 revenue as the service is performed. The need
         for such revisions does not necessarily indicate that the outcome of the transaction cannot be estimated reliably.
24       The stage of completion of a transaction may be determined by a variety of methods. An entity uses the method
         that measures reliably the services performed. Depending on the nature of the transaction, the methods may
         include:
         (a)    surveys of work performed;
         (b)    services performed to date as a percentage of total services to be performed; or
         (c)    the proportion that costs incurred to date bear to the estimated total costs of the transaction. Only costs
                that reflect services performed to date are included in costs incurred to date. Only costs that reflect
                services performed or to be performed are included in the estimated total costs of the transaction.
         Progress payments and advances received from customers often do not reflect the services performed.
25       For practical purposes, when services are performed by an indeterminate number of acts over a specified period
         of time, revenue is recognised on a straight-line basis over the specified period unless there is evidence that
         some other method better represents the stage of completion. When a specific act is much more significant than
         any other acts, the recognition of revenue is postponed until the significant act is executed.
26       When the outcome of the transaction involving the rendering of services cannot be estimated reliably,
         revenue shall be recognised only to the extent of the expenses recognised that are recoverable.
27       During the early stages of a transaction, it is often the case that the outcome of the transaction cannot be
         estimated reliably. Nevertheless, it may be probable that the entity will recover the transaction costs incurred.
         Therefore, revenue is recognised only to the extent of costs incurred that are expected to be recoverable. As the
         outcome of the transaction cannot be estimated reliably, no profit is recognised.
28       When the outcome of a transaction cannot be estimated reliably and it is not probable that the costs incurred will
         be recovered, revenue is not recognised and the costs incurred are recognised as an expense. When the
         uncertainties that prevented the outcome of the contract being estimated reliably no longer exist, revenue is
         recognised in accordance with paragraph 20 rather than in accordance with paragraph 26.
Interest and Royalties
29       Revenue arising from the use by others of entity assets yielding interest and royalties shall be recognised
         on the bases set out in paragraph 30 when:
         (a)    it is probable that the economic benefits associated with the transaction will flow to the entity; and
         (b)    the amount of the revenue can be measured reliably.
30       Revenue shall be recognised on the following bases:
         (a)    interest shall be recognised using the effective interest method as set out in Ind AS109; and
         (b)    royalties shall be recognised on an accrual basis in accordance with the substance of the relevant
                agreement.
         (c)    Omitted*
31       Omitted*
32       Omitted*

*
  Refer Appendix 1
*
  Refer Appendix 1
*
  Refer Appendix 1
78                                   THE GAZETTE OF INDIA : EXTRAORDINARY                           [PART II--SEC. 3(i)]


33        Royalties accrue in accordance with the terms of the relevant agreement and are usually recognised on that basis
          unless, having regard to the substance of the agreement, it is more appropriate to recognise revenue on some
          other systematic and rational basis.
34        Revenue is recognised only when it is probable that the economic benefits associated with the transaction will
          flow to the entity. However, when an uncertainty arises about the collectibility of an amount already included in
          revenue, 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 revenue originally recognised.
Disclosure

35        An entity shall disclose:
          (a)    the accounting policies adopted for the recognition of revenue, including the methods adopted to
                 determine the stage of completion of transactions involving the rendering of services;
          (b)    the amount of each significant category of revenue recognised during the period, including revenue
                 arising from:
                 (i)     the sale of goods;
                 (ii)    the rendering of services; and
                 (iii)   Omitted*
                 (iv)    royalties
                 (v)     Omitted *
          (c)   the amount of revenue arising from exchanges of goods or services included in each significant
                category of revenue.
36        An entity discloses any contingent liabilities and contingent assets in accordance with Ind AS 37, Provisions,
          Contingent Liabilities and Contingent Assets. Contingent liabilities and contingent assets may arise from items
          such as warranty costs, claims, penalties or possible losses.
Appendix A
Revenue--Barter Transactions Involving Advertising Services


Issue

1         An entity (Seller) may enter into a barter transaction to provide advertising services in exchange for receiving
          advertising services from its customer (Customer). Advertisements may be displayed on the Internet or poster
          sites, broadcast on the television or radio, published in magazines or journals, or presented in another medium.
2         In some cases, no cash or other consideration is exchanged between the entities. In some other cases, equal or
          approximately equal amounts of cash or other consideration are also exchanged.
3         A Seller that provides advertising services in the course of its ordinary activities recognises revenue under Ind
          AS 18 from a barter transaction involving advertising when, amongst other criteria, the services exchanged are
          dissimilar (paragraph 12 of Ind AS 18) and the amount of revenue can be measured reliably (paragraph 20(a) of
          Ind AS 18.This Appendix only applies to an exchange of dissimilar advertising services. An exchange of similar
          advertising services is not a transaction that generates revenue under Ind AS 18.
4         The issue is under what circumstances can a Seller reliably measure revenue at the fair value of advertising
          services received or provided in a barter transaction.
Accounting Principles

5         Revenue from a barter transaction involving advertising cannot be measured reliably at the fair value of
          advertising services received. However, a Seller can reliably measure revenue at the fair value of the advertising
          services it provides in a barter transaction, by reference only to non-barter transactions that:
          (a)    involve advertising similar to the advertising in the barter transaction;


*
    Refer Appendix 1
*
    Refer Appendix 1
¹Hkkx IIµ[k.M 3(i)º                                Hkkjr dk jkti=k % vlk/kj.k                                           79

         (b)    occur frequently;
         (c)    represent a predominant number of transactions and amount when compared to all transactions to provide
                advertising that is similar to the advertising in the barter transaction;
         (d)    involve cash and/or another form of consideration (eg marketable securities, non-monetary assets, and
                other services) that has a reliably measurable fair value; and
         (e)    do not involve the same counterparty as in the barter transaction.
Appendix B
Customer Loyalty Programmes

Background

1        Customer loyalty programmes are used by entities to provide customers with incentives to buy their goods or
         services. If a customer buys goods or services, the entity grants the customer award credits (often described as
         `points'). The customer can redeem the award credits for awards such as free or discounted goods or services.
2        The programmes operate in a variety of ways. Customers may be required to accumulate a specified minimum
         number or value of award credits before they are able to redeem them. Award credits may be linked to
         individual purchases or groups of purchases, or to continued custom over a specified period. The entity may
         operate the customer loyalty programme itself or participate in a programme operated by a third party. The
         awards offered may include goods or services supplied by the entity itself and/or rights to claim goods or
         services from a third party.


Scope

3        This Appendix applies to customer loyalty award credits that:
         (a)    an entity grants to its customers as part of a sales transaction, ie a sale of goods, rendering of services or
                use by a customer of entity assets; and
         (b)    subject to meeting any further qualifying conditions, the customers can redeem in the future for free or
                discounted goods or services.
         The Appendix addresses accounting by the entity that grants award credits to its customers.
Issues

4        The issues addressed in this Appendix are:
         (a)    whether the entity's obligation to provide free or discounted goods or services (`awards') in the future
                should be recognised and measured by:
                (i)     allocating some of the consideration received or receivable from the sales transaction to the award
                        credits and deferring the recognition of revenue (applying paragraph 13 of Ind AS 18); or
                (ii)    providing for the estimated future costs of supplying the awards (applying paragraph 19 of Ind AS
                        18); and
      (b)       if consideration is allocated to the award credits:
                (i)         how much should be allocated to them;
                (ii)    when revenue should be recognised; and
                (iii)   if a third party supplies the awards, how revenue should be measured.


Accounting Principles

5        An entity shall apply paragraph 13 of Ind AS 18 and account for award credits as a separately identifiable
         component of the sales transaction(s) in which they are granted (the `initial sale'). The fair value of the
         consideration received or receivable in respect of the initial sale shall be allocated between the award credits and
         the other components of the sale.
80                                THE GAZETTE OF INDIA : EXTRAORDINARY                                  [PART II--SEC. 3(i)]


6        The consideration allocated to the award credits shall be measured by reference to their fair value.
7        If the entity supplies the awards itself, it shall recognise the consideration allocated to award credits as revenue
         when award credits are redeemed and it fulfils its obligations to supply awards. The amount of revenue
         recognised shall be based on the number of award credits that have been redeemed in exchange for awards,
         relative to the total number expected to be redeemed.
8        If a third party supplies the awards, the entity shall assess whether it is collecting the consideration allocated to
         the award credits on its own account (ie as the principal in the transaction) or on behalf of the third party (ie as
         an agent for the third party).
         (a)    If the entity is collecting the consideration on behalf of the third party, it shall:
                (i)    measure its revenue as the net amount retained on its own account, ie the difference between the
                       consideration allocated to the award credits and the amount payable to the third party for supplying
                       the awards; and
                (ii)   recognise this net amount as revenue when the third party becomes obliged to supply the awards
                       and entitled to receive consideration for doing so. These events may occur as soon as the award
                       credits are granted. Alternatively, if the customer can choose to claim awards from either the entity
                       or a third party, these events may occur only when the customer chooses to claim awards from the
                       third party.
         (b)    If the entity is collecting the consideration on its own account, it shall measure its revenue as the gross
                consideration allocated to the award credits and recognise the revenue when it fulfils its obligations in
                respect of the awards.
9        If at any time the unavoidable costs of meeting the obligations to supply the awards are expected to exceed the
         consideration received and receivable for them (ie the consideration allocated to the award credits at the time of
         the initial sale that has not yet been recognised as revenue plus any further consideration receivable when the
         customer redeems the award credits), the entity has onerous contracts. A liability shall be recognised for the
         excess in accordance with Ind AS 37. The need to recognise such a liability could arise if the expected costs of
         supplying awards increase, for example if the entity revises its expectations about the number of award credits
         that will be redeemed.

Application guidance on Appendix B
This application guidance is an integral part of Appendix B.


Measuring the fair value of award credits
AG1      Paragraph 6 of Appendix B requires the consideration allocated to award credits to be measured by reference to
         their fair value. If there is not a quoted market price for an identical award credit, fair value must be measured
         using another valuation technique.
AG2      An entity may measure the fair value of award credits by reference to the fair value of the awards for which they
         could be redeemed. The fair value of the award credits takes into account, as appropriate:
         (a)    the amount of the discounts or incentives that would otherwise be offered to customers who have not
                earned award credits from an initial sale;
         (b)    the proportion of award credits that are not expected to be redeemed by customers; and
         (c)    non-performance risk.
         If customers can choose from a range of different awards, the fair value of the award credits reflects the fair
         values of the range of available awards, weighted in proportion to the frequency with which each award is
         expected to be selected.
AG3      In some circumstances, other valuation techniques may be used. For example, if a third party will supply the
         awards and the entity pays the third party for each award credit it grants, it could measure the fair value of the
         award credits by reference to the amount it pays the third party, adding a reasonable profit margin. Judgement is
         required to select and apply the valuation technique that satisfies the requirements of paragraph 6 of Appendix B
         and is most appropriate in the circumstances.
¹Hkkx IIµ[k.M 3(i)º                                  Hkkjr dk jkti=k % vlk/kj.k                                            81

Appendix C
Transfers of Assets from Customers
Background

1        In the utilities industry, an entity may receive from its customers items of property, plant and equipment that
         must be used to connect those customers to a network and provide them with ongoing access to a supply of
         commodities such as electricity, gas or water. Alternatively, an entity may receive cash from customers for
         the acquisition or construction of such items of property, plant and equipment. Typically, customers are
         required to pay additional amounts for the purchase of goods or services based on usage.
2        Transfers of assets from customers may also occur in industries other than utilities. For example, an entity
         outsourcing its information technology functions may transfer its existing items of property, plant and
         equipment to the outsourcing provider.
3        In some cases, the transferor of the asset may not be the entity that will eventually have ongoing access to the
         supply of goods or services and will be the recipient of those goods or services. However, for convenience
         this Appendix refers to the entity transferring the asset as the customer.

Scope
4        This Appendix applies to the accounting for transfers of items of property, plant and equipment by entities
         that receive such transfers from their customers.
5        Agreements within the scope of this Appendix are agreements in which an entity receives from a customer an
         item of property, plant and equipment that the entity must then use either to connect the customer to a
         network or to provide the customer with ongoing access to a supply of goods or services, or to do both.
6        This Appendix also applies to agreements in which an entity receives cash from a customer when that amount
         of cash must be used only to construct or acquire an item of property, plant and equipment and the entity
         must then use the item of property, plant and equipment either to connect the customer to a network or to
         provide the customer with ongoing access to a supply of goods or services, or to do both.
7        This Appendix does not apply to agreements in which the transfer is either a government grant as defined in
         Ind AS 20 or infrastructure used in a service concession arrangement that is within the scope of Appendix A
         of Ind AS 11 Service Concession Arrangements.
Issues

8        The Appendix addresses the following issues:
         (a)    Is the definition of an asset met?
         (b)    If the definition of an asset is met, how should the transferred item of property, plant and equipment be
                measured on initial recognition?
         (c)    If the item of property, plant and equipment is measured at fair value on initial recognition, how should
                the resulting credit be accounted for?
         (d)    How should the entity account for a transfer of cash from its customer?
Accounting Principles
         Is the definition of an asset met?
9        When an entity receives from a customer a transfer of an item of property, plant and equipment, it shall assess
         whether the transferred item meets the definition of an asset set out in the Framework for the Preparation and
         Presentation of Financial Statements issued by the Institute of Chartered Accountants of India. Paragraph 49(a)
         of the Framework states that `an asset is a resource controlled by the entity as a result of past events and from
         which future economic benefits are expected to flow to the entity.' In most circumstances, the entity obtains the
         right of ownership of the transferred item of property, plant and equipment. However, in determining whether an
         asset exists, the right of ownership is not essential. Therefore, if the customer continues to control the
         transferred item, the asset definition would not be met despite a transfer of ownership.
10       An entity that controls an asset can generally deal with that asset as it pleases. For example, the entity can
         exchange that asset for other assets, employ it to produce goods or services, charge a price for others to use it,
         use it to settle liabilities, hold it, or distribute it to owners. The entity that receives from a customer a transfer of
         an item of property, plant and equipment shall consider all relevant facts and circumstances when assessing
         control of the transferred item. For example, although the entity must use the transferred item of property, plant
82                           THE GAZETTE OF INDIA : EXTRAORDINARY                                 [PART II--SEC. 3(i)]


     and equipment to provide one or more services to the customer, it may have the ability to decide how the
     transferred item of property, plant and equipment is operated and maintained and when it is replaced. In this
     case, the entity would normally conclude that it controls the transferred item of property, plant and equipment.
     How should the transferred item of property, plant and equipment be measured on initial
     recognition?
11   If the entity concludes that the definition of an asset is met, it shall recognise the transferred asset as an item of
     property, plant and equipment in accordance with paragraph 7 of Ind AS 16 and measure its cost on initial
     recognition at its fair value in accordance with paragraph 24 of that Standard.
     How should the credit be accounted for?
12   The following discussion assumes that the entity receiving an item of property, plant and equipment has
     concluded that the transferred item should be recognised and measured in accordance with paragraphs 9­11.
13   Paragraph 12 of Ind AS 18 states that `When goods are sold or services are rendered in exchange for dissimilar
     goods or services, the exchange is regarded as a transaction which generates revenue.' According to the terms of
     the agreements within the scope of this Appendix, a transfer of an item of property, plant and equipment would
     be an exchange for dissimilar goods or services. Consequently, the entity shall recognise revenue in accordance
     with Ind AS 18.

     Identifying the separately identifiable services
14   An entity may agree to deliver one or more services in exchange for the transferred item of property, plant and
     equipment, such as connecting the customer to a network, providing the customer with ongoing access to a
     supply of goods or services, or both. In accordance with paragraph 13 of Ind AS 18, the entity shall identify the
     separately identifiable services included in the agreement.
15   Features that indicate that connecting the customer to a network is a separately identifiable service include:
     (a)    a service connection is delivered to the customer and represents stand-alone value for that customer;
     (b)    the fair value of the service connection can be measured reliably.
16   A feature that indicates that providing the customer with ongoing access to a supply of goods or services is a
     separately identifiable service is that, in the future, the customer making the transfer receives the ongoing
     access, the goods or services, or both at a price lower than would be charged without the transfer of the item of
     property, plant and equipment.
17   Conversely, a feature that indicates that the obligation to provide the customer with ongoing access to a supply
     of goods or services arises from the terms of the entity's operating licence or other regulation rather than from
     the agreement relating to the transfer of an item of property, plant and equipment is that customers that make a
     transfer pay the same price as those that do not for the ongoing access, or for the goods or services, or for both.

     Revenue recognition
18   If only one service is identified, the entity shall recognise revenue when the service is performed in accordance
     with paragraph 20 of Ind AS 18. If such a service is ongoing, revenue shall be recognised in accordance with
     paragraph 20 of this Appendix.
19   If more than one separately identifiable service is identified, paragraph 13 of Ind AS 18 requires the fair value of
     the total consideration received or receivable for the agreement to be allocated to each service and the
     recognition criteria of Ind AS 18 are then applied to each service.
20   If an ongoing service is identified as part of the agreement, the period over which revenue shall be recognised
     for that service is generally determined by the terms of the agreement with the customer. If the agreement does
     not specify a period, the revenue shall be recognised over a period no longer than the useful life of the
     transferred asset used to provide the ongoing service.

     How should the entity account for a transfer of cash from its customer?
21   When an entity receives a transfer of cash from a customer, it shall assess whether the agreement is within the
     scope of this Appendix in accordance with paragraph 6. If it is, the entity shall assess whether the constructed or
     acquired item of property, plant and equipment meets the definition of an asset in accordance with paragraphs 9
     and 10. If the definition of an asset is met, the entity shall recognise the item of property, plant and equipment at
     its cost in accordance with Ind AS 16 and shall recognise revenue in accordance with paragraphs 13­20 at the
     amount of cash received from the customer.
¹Hkkx IIµ[k.M 3(i)º                               Hkkjr dk jkti=k % vlk/kj.k                                        83

Appendix D
References to matters contained in other Indian Accounting Standards
This Appendix is an integral part of Indian Accounting Standard 18.
This appendix lists the appendices which are part of other Indian Accounting Standards and make reference to Ind AS 18,
Revenues
1.        Appendix A, Service Concession Arrangements contained in Ind AS 11 Construction Contracts.
2.        Appendix B, Evaluating the Substance of Transactions Involving the Legal Form of a Lease contained in Ind
          AS 17 Leases.

Appendix 1
Note: This appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out
the differences, if any, between Indian Accounting Standard (Ind AS) 18 and the corresponding International Accounting
Standard (IAS) 18, Revenue, SIC 31, Revenue- Barter Transactions Involving Advertising Services, IFRIC 13, Customer
Loyalty Programmes and IFRIC 18, Transfers Of Assets from Customers.
Comparison with IAS 18, Revenue, SIC 31, IFRIC 13 and IFRIC 18
     1.   The transitional provisions given in IAS 18, SIC 13 and IFRIC 13 have not been given in Ind AS 18, since all
          transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101,
          First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of
          International Financial Reporting Standards.
     2.   On the basis of principles of the IAS 18, IFRIC 15 on 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. IFRIC 15 has not been included in Ind AS 18. Instead, a footnote has been
          given specifying that the Guidance Note on the subject being issued by the Institute of Chartered Accountants of
          India shall be followed.
     3.   Paragraph 2 of IAS 18 which states that IAS 18 supersedes the earlier version IAS 18 is deleted in Ind AS 18 as
          this is not relevant in Ind AS 18. However, paragraph number 2 is retained in Ind AS 18 to maintain consistency
          with paragraph numbers of IAS 18.
     4.   Paragraph number 31 appear as `Deleted `in IAS 18. In order to maintain consistency with paragraph numbers
          of IAS 18, the paragraph number is retained in Ind AS 18.
     5.   Paragraph 30(c), 32, 35 b(iii), 35b(v) appear as `Deleted' in Ind AS 18 which addresses revenue in form of
          interest and dividend. The recognition, measurement of dividend is given in Ind AS 109, whereas the
          measurement of interest is given in Ind AS 109.
     6.   Paragraph 1A is inserted which states that recognition of interest is dealt in this standard whereas measurement
          of interest charges for the use of cash or cash equivalents or amounts due to the entity and recognition and
          measurement of dividend is dealt in accordance with Ind AS 109, Financial Instruments.
     7.   Paragraph 1B is inserted, which prescribes the impairment of any contractual right to receive cash or another
          financial asset arising from this standard, shall be dealt in accordance with Ind AS 109, Financial
          Instruments.''
21. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
     "Indian Accounting Standard (Ind AS) 19", -
     (i)    for paragraph 83, the following paragraph shall be substituted, namely:-
         ``83 The rate used to discount post-employment benefit obligations (both funded and unfunded)
                shall be determined by reference to market yields at the end of the reporting period on
                government bonds. However, for currencies other than Indian rupee for which there is deep
                market in high quality corporate bonds, the market yields (at the end of the reporting
                period) on such high quality corporate bonds denominated in that currency shall be used.
                The currency and term of the government bonds or corporate bonds shall be consistent
                with the currency and estimated term of the post-employment benefit obligations.'';
    (ii)    in Appendix 1, for paragraph 2, the following paragraph shall be substituted, namely:-
84                               THE GAZETTE OF INDIA : EXTRAORDINARY                              [PART II--SEC. 3(i)]


              ``2    According to Ind AS 19 the rate to be used to discount post-employment benefit obligation shall be
                     determined by reference to the market yields on government bonds, whereas under IAS 19 ,
                     the government bonds can be used only for those currencies where there is no deep market of high
                     quality corporate bonds. However, requirements given in IAS 19 in this regard have been
                     retained with appropriate modifications for currencies other than Indian rupee.''.
22. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 23", in Appendix A, for paragraph 2, the following paragraph shall be
    substituted, namely:-
          ``2    Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts, makes
                 reference to this Standard also.''.
23. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 28", -
       (i) in paragraph 17, for item (d), the following item shall be substituted, namely:-

         ``(d)      The ultimate or any intermediate parent of the entity produces financial statements
                    available for public use that comply with Ind ASs, in which subsidiaries are
                    consolidated or are measured at fair value through profit or loss in accordance with Ind
                    AS 110.'';

       (ii)    for paragraph 27, the following paragraph shall be substituted, namely:-
             ``27 A group's share in an associate or a joint venture is the aggregate of the holdings in
                    that associate or joint venture by the parent and its subsidiaries. The holdings of the
                    group's other associates or joint ventures are ignored for this purpose. When an
                    associate or a joint venture has subsidiaries, associates or joint ventures, the profit or
                    loss, other comprehensive income and net assets taken into account in applying the
                    equity method are those recognised in the associate's or joint venture's financial
                    statements (including the associate's or joint venture's share of the profit or loss,
                    other comprehensive income and net assets of its associates and joint ventures),
                    after any adjustments necessary to give effect to uniform accounting policies (see
                    paragraphs 35­36A).'';
        (iii) for paragraph 36, the following paragraph shall be substituted, namely:-

               ``36 Except as described in paragraph 36A, if an associate or a joint venture uses
                    accounting policies other than those of the entity for like transactions and events in
                    similar circumstances, adjustments shall be made to make the associate's or joint
                    venture's accounting policies conform to those of the entity when the associate's or
                    joint venture's financial statements are used by the entity in applying the equity
                    method.'';

        (iv) after paragraph 36, the following paragraph shall be inserted, namely:-

              ``36A Notwithstanding the requirement in paragraph 36, if an entity that is not itself an
                    investment entity has an interest in an associate or joint venture that is an
                    investment entity, the entity may, when applying the equity method, retain the fair
                    value measurement applied by that investment entity associate or joint venture
                    to the investment entity associate's or joint venture's interests in subsidiaries.''.

24. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 32",
    (i) in Appendix A, for paragraph AG21, the following paragraph shall be substituted, namely:-

      ``AG21 A contract that involves the receipt or delivery of physical assets does not give rise to a financial asset of
             one party and a financial liability of the other party unless any corresponding payment is deferred past
             the date on which the physical assets are transferred. Such is the case with the purchase or sale of goods
             on trade credit.'';

     (ii) in Appendix B, for paragraph 1, the following paragraph shall be substituted, namely:-
¹Hkkx IIµ[k.M 3(i)º                                    Hkkjr dk jkti=k % vlk/kj.k                                         85

            ``1.      Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts.''.
25. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 34",-
    (i)    in paragraph 5, for item (e), the following item shall be substituted, namely:-

              ``(e) notes, comprising significant accounting policies and other explanatory information;'';

     (ii)      in paragraph 15B, for item (b), the following item shall be substituted, namely:-

             ``(b)       recognition of a loss from the impairment of financial assets, property, plant and equipment,
                         intangible assets, or other assets, and the reversal of such an impairment loss; '';

    (iii)      in paragraph 16A, for the opening paragraph, starting with `In addition to' and ending with `year-to-date
               basis.', the following paragraph shall be substituted, namely:-
             ``16A In addition to disclosing significant events and transactions in accordance with
                   paragraphs 15­15C, an entity shall include the following information, in the notes to its interim
                   financial statements or elsewhere in the interim financial report. The following disclosures
                   shall be given either in the interim financial statements or incorporated by cross-reference from
                   the interim financial statements to some other statement (such as management commentary or
                   risk report) that is available to users of the financial statements on the same terms as the interim
                   financial statements and at the same time. If users of the financial statements do not have
                   access to the information incorporated by cross-reference on the same terms and at the same
                   time, the interim financial report is incomplete. The information shall normally be reported on a
                   financial year-to-date basis.'';

    (iv)    in paragraph 16A, item (l) shall be omitted.
26. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
     "Indian Accounting Standard (Ind AS) 36", in paragraph 2, for item (b), the following item shall be substituted
     namely:-

            ``(b)     assets arising from construction contracts (see Ind AS 11, Construction Contracts and Ind AS 18,
                      Revenue );''.
27. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 37", -
    (i) for paragraph 5, the following paragraph shall be substituted, namely:-


    ``5.           When another Standard deals with a specific type of provision, contingent liability or contingent asset, an
                   entity applies that Standard instead of this Standard. For example, some types of provisions are addressed in
                   Standards on:

                   (a) construction contracts (see Ind AS 11, Construction Contracts);
                   (b) income taxes (see Ind AS 12, Income Taxes);
                   (c) leases (see Ind AS 17, Leases). However, as Ind AS 17 contains no specific requirements to deal with
                       operating leases that have become onerous, this Standard applies to such cases;
                   (d) employee benefits (see Ind AS 19, Employee Benefits);
                   (e) insurance contracts (see Ind AS 104, Insurance Contracts). However, this Standard applies to
                       provisions, contingent liabilities and contingent assets of an insurer, other than those arising from its
                       contractual obligations and rights under insurance contracts within the scope of Ind AS 104; and
                   (f) contingent consideration of an acquirer in a business combination (see Ind AS 103, Business
                       Combinations). '';
     (ii) for paragraph 6, the following paragraph shall be substituted, namely:-

            ``6.        Some amounts treated as provisions may relate to the recognition of revenue, for example where an
                   entity gives guarantees in exchange for a fee. This Standard does not address the recognition of revenue.
                   Ind AS 18, Revenue, identifies the circumstances in which revenue is recognised and provides practical
86                                   THE GAZETTE OF INDIA : EXTRAORDINARY                               [PART II--SEC. 3(i)]


                 guidance on the application of the recognition criteria. This Standard does not change the requirements of
                 Ind AS 18.'';
     (iii) in Appendix D, for paragraph (i), the following paragraph shall be substituted, namely:-

              ``(i) Appendix A, Service Concession Arrangements and Appendix B, Service Concession Arrangements:
                    Disclosures, contained in Ind AS 11, Construction Contracts.'';
     (iv) in Appendix 1, for paragraph 3, the following paragraph shall be substituted, namely:-

             ``3. The following paragraph numbers appear as `Deleted' in IAS 37. In order to maintain consistency with
                  paragraph numbers of IAS 37, the paragraph numbers are retained in Ind AS 37 :
                         (i) paragraph 1(b)
                         (ii) paragraph 4''.
28. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 38",
     (i) in paragraph 3, for item (a), the following item shall be substituted, namely:-


               ``(a) intangible assets held by an entity for sale in the ordinary course of business (see Ind AS 2, Inventories,
                     and Ind AS 11, Construction Contracts).'';
     (ii)      in paragraph 3, item (i) shall be omitted.

     (iii)     for paragraph 114, the following paragraph shall be substituted, namely:-

              ``114 The disposal of an intangible asset may occur in a variety of ways (eg by sale, by entering into a finance
                    lease, or by donation). In determining the date of disposal of such an asset, an entity applies the criteria
                    in Ind AS 18, Revenue, for recognising revenue from the sale of goods. Ind AS 17 applies to disposal by
                    a sale and leaseback. ''

     (iv)      for paragraph 116, the following shall be substituted, namely:-

              ``116 The consideration receivable on disposal of an intangible asset is recognised initially at its fair value. If
                   payment for the intangible asset is deferred, the consideration received is recognised initially at the cash
                   price equivalent. The difference between the nominal amount of the consideration and the cash price
                   equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield
                   on the receivable. '';

      (v)      in Appendix A, for paragraph 6, the following paragraph shall be substituted, namely:-

              ``6 Ind AS 38 does not apply to intangible assets held by an entity for sale in the ordinary course of business
                  (see Ind AS 2 and Ind AS 11) or leases that fall within the scope of Ind AS 17. Accordingly, this Appendix
                  does not apply to expenditure on the development or operation of a web site (or web site software) for sale
                  to another entity. When a web site is leased under an operating lease, the lessor applies this Appendix.
                  When a web site is leased under a finance lease, the lessee applies this Appendix after initial recognition of
                  the leased asset. '';
     (vi)      in Appendix B, -
               (a) for paragraph 1, the following paragraph shall be substituted, namely:-

                 ``1 Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts. '';
               (b) for paragraph 2, the following paragraph shall be substituted, namely:-

                  ``2   Appendix B, Service Concession Arrangements: Disclosures contained in Ind AS 11, Construction
                        Contracts. ''.
29. In the principal rules, in the "Annexure", under the heading "B. Indian Accounting Standards (Ind AS)", in
    "Indian Accounting Standard (Ind AS) 40",
     (i) in paragraph 3, for item (b), the following item shall be substituted namely:-

         ``(b)      recognition of lease income from investment property (see also Ind AS 18, Revenue); '';
¹Hkkx IIµ[k.M 3(i)º                                 Hkkjr dk jkti=k % vlk/kj.k                                         87



      (ii) in paragraph 9, for item (b), the following item shall be substituted, namely:-

         ``(b) property being constructed or developed on behalf of third parties (see Ind AS 11, Construction
               Contracts). '';
     (iii) for paragraph 67, the following paragraph shall be substituted, namely:-

           ``67      The disposal of an investment property may be achieved by sale or by entering into a finance lease. In
                  determining the date of disposal for investment property, an entity applies the criteria in Ind AS 18 for
                  recognising revenue from the sale of goods. Ind AS 17 applies to a disposal effected by entering into a
                  finance lease and to a sale and leaseback. '';

     (iv) for paragraph 70, the following paragraph shall be substituted, namely:-

           ``70     The consideration receivable on disposal of an investment property is recognised initially at fair value.
                  In particular, if payment for an investment property is deferred, the consideration received is recognised
                  initially at the cash price equivalent. The difference between the nominal amount of the consideration and
                  the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 using the
                  effective interest method. '';

      (v) in Appendix 1, in paragraph 7, item (i) shall be omitted.

                                                                                             [F. No. 01/01/2009-CL-V(Part)]

                                                                                 AMARDEEP SINGH BHATIA, Jt. Secy.




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