Saturday, April 2, 2016

MCA notifies 3 Standards - 2 on Revenue Recognition & 1 on Fixed Assets

On March 30, 2016 the Ministry of Corporate Affairs (MCA) has notified three new Standards, viz Ind AS 11, Ind AS 18 and Accounting Standard (AS) 10, Property, Plant and Equipment.

Applicability of Ind AS 115, Revenue from Contracts with Customers has already been deferred till April 1, 2018. So, MCA has notified two Ind ASs, Ind AS 11 and Ind AS 18 to provide guidance on recognition and measurement of revenue.

Ind AS 11, deals with measurement and recognition of revenue in the financial statements of contractorsin case of construction contracts. Ind AS 11 is similar to existing AS 7, Construction Contracts except that as per this Standard, contract revenue should be recognised at fair value.

Ind AS 18, provides guidance on accounting for revenue arising from the following transactions:-
(i) the sale of goods;

(ii) the rendering of services; and

(iii) the use by others of entity assets yielding interest and royalties.

In all of the above cases, revenue shall be measured at fair value.

Revenue arising from dividend shall be dealt with in accordance with Ind AS 109, Financial Instruments.

Newly notified AS 10 should be applied in accounting of property. Plant and equipment. Accounting includes recognition of property, plant and equipment, the determination of their carrying amounts and the deprecation charges to be recognised in relation to them. Therefore, it replaces existing AS 10, Accounting for Fixed Assets and AS 6, Depreciation Accounting.

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