ICAI - The Institute of Chartered Accountants of India set up by an act of parliament. Level I enterprises are those enterprises whose turnover for the immediately preceding accounting year exceeds 50 crores. Accounting Standards – Revenue Recognition! After more than a decade of work, the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) had published their largely converged standards on revenue recognition in May, 2014. Such ordinary activities include: Thus, a business entity can measure revenue in terms of the amount charged to the customers for (i) supplying goods,(ii) providing services and (iii) granting them the facility to use entity’s resources. There are certain cases in the specific industry where the performance may be substantially complete prior to the execution of the transaction generating revenue. #AS9 Accounting standard 9 (AS9) on revenue recognition talks about the different cases of delivery of goods and risks&rewards associated with it. ClearTax serves 2.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India. CAs, experts and businesses can get GST ready with ClearTax GST software & certification course. c. Use of the enterprises resources by others giving interest, dividend and royalties. However, such amounts are appropriately recognized in the statement of profit and loss sometimes. revenue recognition criteria have been met. According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received. https://quickbooks.intuit.com/in/resources/accounting-taxes/as-9/. on 08 February 2019. 3. Save taxes with ClearTax by investing in tax saving mutual funds (ELSS) online. Accounting standard 9 is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from: From sale of goods, From rendering of services, and From the use by others of enterprise resources yielding interest, royalties and dividends In this method, the construction company would approach revenue recognition by comparing the cost incurred to-date to the estimated total cost. A company is required to consider the underlying substance and economics of an arrangement, not merely its legal form. BACKGROUND AND INTRODUCTION A. As such, the accounting for Revenue recognition principles within a company should remain constant over time as well, so historical financials can be analyzed and reviewed for seasonal trends or inconsistencies. Each financial situation is different, the advice provided is intended to be general. The use by others of such enterprise resources gives rise to: (i) Interest: Revenue is recognized on the time proportion basis after taking into account the amount outstanding and the rate applicable. Does not apply to companies engaged in insurance business. The new revenue standards (ASC 606 and IFRS 15, Revenue from Contracts with Customers) replace industry-specific guidance with a single revenue recognition model. Objective of AS-9 Any revenue generated from sale of goods in which company is dealing. Such a claim may include asking for a price hike, export incentives etc. And any uncertainties regarding the determination of such an amount and its related costs may have an impact on the timing of revenue recognition. Revenue has to be recognized when the owner’s right to receive payment is established. The Accounting Standard is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from The sale of goods, The rendering of services, and Examples Of Specific Revenue Recognition Practices 8 Disclosures 9 IFRS 15: Culmination Of The Joint Iasb-Fasb Revenue Recognition Project 13 CONTENTS . There is no need to adjust the amount of revenue with the amount of uncertainty. As per the AS 9 Revenue Recognition issued by ICAI “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, rendering of services & from various other sources like interest, royalties & dividends”. As per ICAI, “Enterprise means a company as defined in section 3 of the Companies Act, 1956”. The royalties accrue according to the terms of the agreement between the parties. Revenue recognition AS-9 1. (ii) Royalties: Royalty includes the charge for the use of patents, know-how, trademarks, and copyrights. This standard was issued by ICAI in the year 1985 and in the initial years, it was re-commendatory for only Level I enterprises and but was made mandatory for all other enterprises from April 01, 1993. It need not consider the total inflow of cash, receivables and other consideration to measure its revenue. 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