This document discusses the key aspects of revenue recognition as per accounting standards in India. It provides: 1) A definition of revenue as the gross inflow of cash from the sale of goods, rendering of services, and use of enterprise resources. 2) The principles of revenue recognition which state that revenue is recognized when it is earned and realized/realizable. 3) Details on the recognition of revenue from different sources like sale of goods, rendering of services, and other incomes.

2. GROUP MEMBERS
NAME ROLL NO
SHAKEELA M. 16
SHWETA V. 39
SALMAN K. 46
YOGENDRA S. 52

3. Definition
Revenue is the gross inflow of cash, receivables orother
consideration arising in the course of the ordinary activities
of an enterprise from the,
 Sale of goods
 Rendering of services and
 Use by others, of enterprise resources, yielding interest,
royalties and dividends
Recognition –
Process of recording and reporting an item as an element of
financial statement

4. Principles
• The revenue recognition principle provides that
revenue is recognized:
when it is earned, and
when it is realized or realizable
• Revenue is earned when the earnings process is
substantially complete
• Revenue is realized when goods and services
are exchanged for cash or claims to cash.
Revenue is realizable when assetsreceived are
convertible into a known amount of cash

5. Applicability
This accouning standard is not appicable to following
revenue or gain:
 Revenue arising from construction contracts
 Revenue arising from hire purchase, lease agreements
 Revenue arising from Govn.grants and subsidies
 Revenue of insurance companies arising from insurance contracts
 Gain- realised or unrealised gain. Eg- Profit on sale of fixed assets.

6. Revenue Recognition

7. Revenue from Sale of Goods
Revenue on sale of goods shall be recognized (only) when the
following set of conditions is fulfilled:
 Seller has tranferred the ownership of goodsto the buyer for a price
OR
All significant risks and rewards of ownership have been tranfered tobuyer
 Seller does not retain any effective control of ownership of the tranferred
goods
 No significant uncertainty in collection of the amount of consideration (i.e.
cash, receivables etc.)

8. Revenue recognition when the delivery of goods
is delayed at buyers request –
Delivery is delayed at buyer’s request and
buyer takes title and accepts billing. Revenue
should be recognised immediately but goods
must be in the hands of seller, identified and
ready for delivery at the time of recognition of
revenue.

9. Revenue recognition when delivery of
goods sold is subject to conditions:
• Installation and inspection
• Sale on approval
• Guaranteed sales
• Warranty sales
• Consignment sales
• Special order and shipments
• Subscriptions for publication
• Installment sales

10. 2.Revenue from
Rendering of Services
Revenue from service transactions is
usually recognised as the service is
performed, either by the proportionate
completion method or by the completed
service contract method.
(i) Proportionate completion method
(ii) Completed service contract method

11. (i)Proportionate completion method
-recognised by the reference to the performance
of each act
-would be determined on the basis of contract
value, associated cost or other suitable basis.
(ii)Completed service contract method
-recognised when the service is about to be
completed

12. Revenue recognition norms for
rendering of service under special
conditions are as follows:
• Installation fees
• Advertising and
insurance agency
commission
• Admission fee
• Tution fee
• Entrance and
membership fees

13. 3. Revenue from other
incomes
Revenue arising from the use by others of enterprise
resources yielding interest, royalties a n d dividends
should only be recognised when no significant
uncertainty as to measurability or collectability exists.
These revenues are recognised on the following bases:
(i)Interest :on a time proportion basis t a k i n g into
account the a m o u n t outstanding a n d the rate
applicable.
(ii)Royalties : on a n accrual basis in accordance w i t h the
terms of the relevant agreement.
(iii)Dividends from investments in shares: when the
owner’s right to receive p ayment is established.

14. Transactions with multiple
elements
An enterprise may contract with a buyer to
deliver goods and services in addition to the
construction/development of Real state (eg.
Property management services, sale of
decorative fittings etc.). In such cases, the
contract consideration should be split into
seperately identifiable componentsincluding
one of the construction and delivery of real
estate units.

15. Treatment of inter-divisional
transfers
ICAI has announced that the inter-
divisional transfers are not the
revenue as per AS-9 “Revenue
Recognition”
Since in case of inter divisional
transfers, risks and rewards remain
with the enterprise and also there
is no consideration from the point
of view of the entreprise as a
whole, the recognition criteria for
revenue recognition are also not
fulfilled in respect of inter-
divisional transfers.