1. Presented by Pradeep Kumar ACA,CPA(USA), DISA(ICAI), CISA(USA)
IAS 18 REVENUE
Presented by
Pradeep Kumar
ACA,CPA(USA), DISA(ICAI), CISA(USA)

2. SESSION AS 9 Revenue Recognition CAS 9 Revenue IAS 18 Revenue
IFRIC 13 Customer Loyalty Programs
IFRIC 18 Transfer of assets from customers
IFRIC 15 Agreements relating to construction of real estate
SIC 31 Barter Transactions involving advertising services

3. Scope
Sale of goods – land or property held for resale
Rendering of services – AS 7?
Interest, royalties, & dividends
Does not deal with
Revenue
Gross inflow of economic benefits during the period - ordinary activities –inflows result in increases in equity, other than increases relating to contributions from equity participants.
economic benefits– Framework for preparation & presentation of F\S issued by ICAI.

4. MEASUREMENT OF REVENUE
Fair value of the consideration received or receivable
cash or cash equivalents received or receivable
interest-free credit or below market rate
Discount future receipts using an imputed interest rate
exchanged or swapped for goods or services – similar nature & value

5. Transaction Identification of Transaction
separately identifiable components of a single transaction
Combining linked transactions
Sale of Goods:
Transfer of significant risks & rewards of ownership
No continuing managerial involvement or effective control of goods sold
Uncertainty
Matching Concept

6. Recognition Reliable measurement of revenue
Costs incurred or to be incurred reliably measured
Probable flow of economic benefits
Rendering of services:
Reliable measurement of revenue,
probable flow of economic benefits,
Reliable measurement of state of completion
Reliable measurement of cost incur to complete
Reliable estimate: enforceable rights, consideration to be exchanged & manner & terms of settlement

7. STAGE OF COMPLETION
Depending on the nature of the transaction, the methods may include:
(a) surveys of work performed;
(b) services performed to date as a percentage
© proportion that costs incurred to date bear to the estimated total costs of the transaction.
Other Aspects:
Progress payments and advances received from customers?
Indeterminate number of acts over a specified period of time ?
Unable to estimate revenue? Expenses?
Revenue not recognised, costs are recognised

8. RECOGNITION Interest, royalties & dividends
Probable flow of economic benefits
Reliable measurement of revenue
Base:
Interest: Effective Interest Method IAS 39,CAS 30
Royalties: accrual
Dividends: right to receive

9. DISCLOSURE
Accounting Policies including methods used to determine stage of completion.
Amount of significant category of revenue
Revenue from exchange of goods or services.

10. WIPRO NOTES TO ACCOUNTS
WIPRO IGAAP
Revenue from Software development services comprises revenue from time and material and fixed –price contracts.
Revenue from time and material contracts is recognised as related services are performed.
Revenue from fixed-price, fixed-time frame contracts is generally recognised in accordance with the “Percentage of Completion” method.
WIPRO IFRS Q
The Company derives revenue primarily from software development and related services, BPO services, sale of IT and other products.
a) Services:
The Company recognizes revenue when the significant terms of the arrangement are enforceable, services are being delivered and the collectability is reasonably assured . The method for recognizing revenues and costs depends on the nature of the services rendered:
A. Time and materials contracts
Revenues and costs relating to time and materials contracts are recognized as the related services are rendered.
B. Fixed-price contracts
Revenues from fixed -price contracts, including systems development and integration contracts are recognized using the “percentage -of-completion” method

11. WIPRO NOTES TO ACCOUNTS
IGAAP
Provision for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses become probable based on the current contract estimates
IFRS
Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity.
If the Company does not have a sufficient basis to measure the progress of completion or to estimate the total contract revenues and costs, revenue is recognized only to the extent of contract cost incurred for which recoverability is probable.
When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the statement of income in the period in which such losses become probable based on the current contract estimates

12. WIRPRO NOTES TO ACCOUNTS
Revenues from BPO services are derived from both time-based and unit-priced contracts. Revenue is recognised as the related services are performed, in accordance with the specific terms of the contract with the customers.
Revenue from customer training, support and other services is recognised as the related services are performed.
Revenue from application maintenance services is recognised over the period of the contract.
Revenue from contracts with multiple -element arrangements are recognized using the guidance in IAS 18,
Revenue. The Company allocates the arrangement consideration to separately identifiable components based on their relative fair values.
Revenue from maintenance contracts is recognized ratably over the period of the contract using the percentage of completion method.
The Company accrues the estimated cost of warranties at the time when the revenue is recognized. The accruals are based on the Company’s historical experience of material usage and service deliver y costs

13. WIPRO NOTES TO ACCOUNTS
Products:
Revenue from sale of products is recognised when the product has been delivered, in accordance with the sales contract. Revenues from product sales are shown as net of excise duty, sales tax separately charged and applicable discounts.
Revenue from products are recognized when the significant risks and rewards of ownership have transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

14. SIC 31 Barter transactions involving advertising services. Scope:
no cash or other consideration is exchanged between the entities – advertising services
Advertising Services exchanged are dissimilar
Measurement:
a Seller can reliably measure revenue at the fair value of the advertising services it provides in a barter transaction.

15. IFRIC 13 Customer Loyalty Programmes Scope:
Credits as part of sales transaction that the customer can redeem in future
Account for award credits as a separately identifiable component of the initial sale either on its own or on behalf of third party
Use fair value

16. Example
A grocery retailer operates a customer loyalty programme. It grants programme members loyalty points when they spend a specified amount on groceries. Programme members can redeem the points for further groceries. The points have no expiry date. In one period, the entity grants 100 points. Management expects 80 of these points to be redeemed. Management estimates the fair value of each loyalty point to be Re.1, and defers revenue of Rs.100.
Year 1
IE2: At the end of the first year, 40 of the points have been redeemed in exchange for groceries, ie half of those expected to be redeemed. The entity recognises
revenue of (40 points/80 points) × Rs. 100 = Rs. 50.

17. EXAMPLE
Year 2
IE3 In the second year, management revises its expectations. It now expects 90 points to be redeemed altogether.
IE4 During the second year, 41 points are redeemed, bringing the total number redeemed to = 81 points. The cumulative revenue that the entity recognises is (81 points/90 points) × Rs. 100 = Rs. 90. The entity has recognised revenue of Rs. 50 in the first year, so it recognises Rs. 40 in the second year.
Year 3
IE5 In the third year, a further nine points are redeemed, taking the total number of points redeemed to = 90. Management continues to expect that only 90 points will ever be redeemed, ie that no more points will be redeemed after the third year. So the cumulative revenue to date is (90 points/909 points) × Rs. 100 = Rs The entity has already recognised Rs. 90 of revenue (Rs. 50 in the first year and Rs. 40 in the second year). So it recognises the remaining Rs. 10 in the third year. All of the revenue initially deferred has now been recognised.

18. IFRIC 15 Agreements for construction of real estate Scope:
Agreements in construction of real estate & includes delivery of other goods & services.
Agreement under AS 7 or AS 9? Major structural elements.
Agreement is construction contract
Agreement is rendering of services? or
Agreement is of sale of goods? During construction or at single point?
Further work on real estate already delivered?

21. Disclosures
the % of completion method for agreements that meet all the criteria in paragraph 14 of AS 9 continuously as construction progresses
How it determines the agreement
Amount of revenue arising
Methods used to % completion
Agreements that in process at reporting date
Cost incurred & revenue recognised
Advance payments received

22. IFRIC 18 Transfer of assets from customers Scope:
Applies to PPE transferred from customers
to connect the customer to a network or provide the customer with ongoing access to a supply of goods or services, or to do both.
Entity receives cash to construct PPE
Recognition of asset:
Asset transferred – Fair Value
Cash received from customer – Cost
Example: Electricity Substation
How credit shall be accounted?

23. IFRIC 18 Identifying the separately identifiable services
Service connection,
ongoing access, the goods or services, or both at a price lower than would be charged.
Revenue recognition
one service
more than one separately identifiable service
ongoing service is identified

24. EXEMPTIONS FOR 1ST TIME ADOPTER
Transfers of assets from customers
D24 A first time adopter shall apply Appendix D of AS 9 (Revised 20XX) prospectively to transfers of assets from customers received on or after the date of transition to Ind-AS,
Earlier application is permitted provided
Valuations and other information needed to apply Appendix D of AS 9 (Revised 20XX) to past transfers were obtained at the time those transfers occurred.
Disclose the date from which the Appendix D of AS 9 (Revised 20XX) was applied.

25. 1ST TIME ADOPTION IMPLEMENTATION GUIDANCE
AS 9 (Revised 20XX) Revenue
IG17 If an entity has received amounts that do not yet qualify for recognition as revenue in accordance with AS 9 (Revised 20XX) (for example, the proceeds of a sale that does not qualify for revenue recognition), the entity recognises the amounts received as a liability in its opening Ind-AS Balance Sheet and measures that liability at the amount received.

26. EXAMPLES Sale of goods: Bill & hold sales – buyer request
Goods shipped subject to conditions
Installation & inspection
Approval
Consignment sales – recipient to 3rd party
Cash on delivery
Lay away sales:- Final installment
Advance payment
Sale & repurchase agreement
Subscriptions to publications and similar items
Installment sales

27. RENDERING OF SERVICES Installation fee
Servicing fee – included in price of contract.
Financial service fee –for which service is provided
effective interest rate for financial instrument
Origination fees evaluating the borrower’s financial condition, recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction.
Commitment fees received by the entity to originate a loan
Franchise fees.

28. Interest Royalty & Dividend
Licence fees and royalties – agreement or SLM
An assignment of rights for a fixed fee or non-refundable guarantee under a noncancellable
contract which permits the licensee to exploit those rights freely and
the licensor has no remaining obligations to perform is, in substance, a sale.

29. Agent or Principal
acting as a principal when it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services.
primary responsibility for providing the goods or services to the customer or for fulfilling the order
inventory risk before or after the customer order
latitude in establishing prices, either directly or indirectly
entity bears the customer’s credit risk for the amount receivable from the customer
either a fixed fee per transaction or a stated percentage of the amount billed to the customer

30. SOURCE
ED on AS 9 Revenue, ED on AS 41 First time adoption of Indian Accounting Standards.
IAS 18, SIC & IFRICs
Wipro Annual statements & interim F\s as on