Which accounting standard is applicable for revenue recognition as 9?
Difference between IND AS -18 & AS -9
| AS 9 Revenue Recognition | IND AS 18 |
|---|---|
| It is recognized at nominal value | It is recognized at fair value |
Which type of transactions are not covered as per the standard as 9 revenue recognition?
However, this accounting standard does not deal with revenues resulting from: construction contracts. hire purchase or lease agreements. government grants and other such subsidies.
What is not covered by as 9?
AS 9 does not deal with the following aspects of revenue recognition to which special considerations apply: Revenue arising from construction contracts; Revenue arising from hire-purchase, lease agreements; Revenue of insurance companies arising from insurance contracts.
Which accounts standard is applicable for revenue recognition?
Generally accepted accounting principles (GAAP) require that revenues are recognized according to the revenue recognition principle, a feature of accrual accounting.
What are the salient features of the AS 9 revenue recognition?
Revenue should be recognized as per the substance of the agreement of sale or after the reasonable period has expired. Sales should be recognized immediately but the provision should be made to cover unexpired warranty. Revenue should be recognized only when the goods are sold to third party.
Why is revenue recognition important?
The revenue recognition principle, a key feature of accrual-basis accounting, dictates that companies recognize revenue as it is earned, not when they receive payment. Accurate revenue recognition is essential because it directly affects the integrity and consistency of a company’s financial reporting.
Can you recognize revenue without a signed contract?
Under the guidance in ASC 605, when an entity is able to demonstrate through past arrangements that the revenue is either realized or realizable and earned, an entity can recognize revenue even without the presence of a legally signed contract.
Why is revenue recognition principle important?
The revenue recognition principle enables your business to show profit and loss accurately, since you will be recording revenue when it is earned, not when it is received. Using the revenue recognition principle also helps with financial projections; allowing your business to more accurately project future revenues.
What are the conditions for revenue recognition?
Conditions for Revenue Recognition Risks and rewards of ownership have been transferred from the seller to the buyer. The seller loses control over the goods sold. The collection of payment from goods or services is reasonably assured. The amount of revenue can be reasonably measured.
What is residual method of revenue recognition?
Residual approach: An entity may estimate the standalone selling price by reference to the total transaction price less the sum of observable standalone selling prices of other goods or services in the contract.
What drives the timing of revenue recognition?
Entities recognize revenue over time if the performance obligations in the contract meet one of three criteria: The customer simultaneously receives and consumes the benefits provided by the entity’s performance as performed.
What is stand alone price?
The standalone selling price is defined as the price at which a contractor would sell a promised good or service separately to a customer.
What is variable consideration?
Variable consideration includes discounts, credits, rebates, performance bonus, penalties, sales returns, refunds, price concessions, incentives, etc. The transaction price includes such variable considerations, whether explicitly stated in the contract or implicitly stated.
What is as 9 – revenue recognition?
AS 9 – REVENUE RECOGNITION Applicability This AS lays down fundamental principles of Revenue Recognition. By its name it name it implies that it is a more of a measurement standard than a disclosure. What and when to credit profit and loss account is determined by this AS.
What is revenue under AS-9?
1.1 What is Revenue? – As per AS-9, Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends.
When is it appropriate to recognise revenue?
In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate collection will be made. Where there is no uncertainty as to ultimate collection, revenue is recognised at the time of sale or rendering of service even though payments are made by instalments
What is the purpose of the statement of revenue recognition?
The Statement is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from § the use by others of enterprise resources yielding interest, royalties and dividends. 2. This Statement does not deal with the following aspects of revenue recognition to which special considerations apply: