Revenue recognition new accounting standard Ind AS 115 from April 1
The Corporate Affairs Ministry has notified Indian Accounting Standard (Ind AS) 115 which would be effective from the new financial year, starting Sunday.
As per Accounting Experts, revenue recognition standard (Ind AS 115) provides for numerous additional disclosures, which will significantly enhance transparency of financial statements.The move will also have an impact on companies operating in diverse sectors, including technology, real estate and telecom.
According to officials, the objective of Ind AS 115 is to establish the principles that should be applied when reporting useful information to users of financial statements, like the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer.
Ind AS 115 also requires an entity to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, it noted.
Once the new standard goes into effect, the other two standards Ind AS 18 and 11, which are related to revenue and construction contracts, would be withdrawn.
The standard is likely to affect the measurement, recognition…and disclosure of revenue, which is typically an entitys most important financial performance indicator keenly scrutinised by investors and analysts, he said.
Ind AS 115 would help in having more accurate and transparent accounting ways said Former ICAI President Manoj Fadnis. However, companies might face challenges in implementing the standard in the first quarter of the next financial year, he added.
Ind AS 115 to increaseTransparency
Objective of Ind AS 115 is to establish the principles that should be applied when reporting useful information to users of financial statements.
The standard requires an entity to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
source:www.newindianexpress.com
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