Financial Reporting · Ind AS 115 Revenue from Contracts with Customers

Ind AS 115: Recognising Revenue Over Time and at a Point in Time

Updated 5 October 2026 · Fact-checked

Under Ind AS 115 you recognise revenue when a performance obligation is satisfied, that is, when control of the promised good or service passes to the customer. Test the three over-time criteria first. If none is met, recognise at a point in time using control indicators. For over time, measure progress using input or output methods.

Understand Recognising Revenue: Over Time and Point in Time

Ind AS 115 says revenue is recognised when (or as) the entity satisfies a performance obligation by transferring a promised good or service to the customer. The test is transfer of control, not transfer of risks, billing or cash receipt. Control means the customer can direct the use of the asset and obtain substantially all its remaining benefits.

For every performance obligation, you must first decide whether it is satisfied over time or at a point in time. The standard makes you test over time first. If the over-time test fails, the obligation is satisfied at a point in time by default. You cannot choose freely between the two.

A performance obligation is satisfied over time if any one of three criteria is met: (a) the customer simultaneously receives and consumes the benefits as the entity performs; (b) the entity's performance creates or enhances an asset that the customer controls as it is created; (c) the entity's performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date.

If recognised over time, revenue follows the measure of progress towards complete satisfaction. You choose one method that faithfully depicts the transfer of control and apply it consistently to similar obligations. Output methods use value transferred to the customer (units delivered, surveys of performance, milestones). Input methods use the entity's efforts (costs incurred, labour hours, machine hours). A progress measure can be reasonably made only if the entity has reliable information. If it cannot reasonably measure the outcome but expects to recover the costs incurred, it recognises revenue only to the extent of costs incurred until it can measure progress reasonably.

If recognised at a point in time, you decide the moment control passes. The indicators are: present right to payment, legal title, physical possession, significant risks and rewards of ownership, and customer acceptance. No single indicator decides it. You look at the facts as a whole.

Key rules to remember

Over-time criteria (any one): (a) Customer receives and consumes benefits as entity performs; (b) Customer controls the asset as it is created or enhanced; (c) No alternative use AND enforceable right to payment for performance to date; If none is met, revenue is recognised at a point in time.
Cost-to-cost progress (input method): Progress % = Costs incurred to date ÷ Total estimated costs; Costs that do not reflect transfer of control (wasted materials, uninstalled materials bought well ahead) are excluded or adjusted.
Cumulative revenue: Cumulative revenue = Transaction price × Progress %; Revenue for the year = cumulative revenue at year end − revenue recognised in earlier years.
Output method progress: Progress % = Value of units delivered or milestones achieved ÷ Total contract value or units; Use where output directly measures value to the customer.
Control indicators at a point in time: Present right to payment; legal title; physical possession; risks and rewards; customer acceptance; These are indicators, not a checklist where all must be met.
Outcome not reasonably measurable: Revenue = Costs incurred (only if costs are expected to be recovered); Zero margin until progress can be measured reasonably.

How to solve Recognising Revenue: Over Time and Point in Time questions

Use this sequence for any question on timing of revenue. Do it for each performance obligation separately.

1Identify the performance obligations in the contract and the transaction price allocated to each.
2Test the three over-time criteria one by one. Quote the criterion and the fact that meets or fails it.
3If any criterion is met, choose a progress method (input or output) that best depicts transfer of control and say why.
4Compute progress %, cumulative revenue, then revenue for the period after deducting amounts already recognised.
5If no criterion is met, apply the control indicators (payment, title, possession, risks and rewards, acceptance) and name the date control passes.
6Check special points: costs not reflecting progress, uninstalled materials, outcome not measurable, loss-making contract (Ind AS 37 onerous provision).
7Write the journal entries or the amount for the statement of profit and loss, then state the conclusion in one line.

Quickest way: Two-gate shortcut

When to use it: Use when you have little time on a case-scenario MCQ or a short written question.

Gate 1: ask 'If the entity stopped halfway, could another entity continue without redoing the work, or is the customer already holding the asset?' A yes points to over time (criteria a or b).
Gate 2: if the item is made specifically for one customer and the entity can claim payment for work done even if the customer cancels, it is over time (criterion c).
If both gates fail, say point in time and name the date of transfer of control, usually delivery or acceptance.
For measurement, use cost-to-cost unless units or milestones clearly show value delivered.
Compute cumulative revenue, then subtract earlier years.

Common mistakes in Recognising Revenue: Over Time and Point in Time

Recognising revenue when the invoice is raised or cash is received.
Old habits from billing-based or realisation-based thinking.
Fix: Ask only one question: has control passed? Billing and cash are irrelevant to timing.
Choosing over time because the contract is long term.
Students link duration with percentage completion.
Fix: A long contract can still be point in time. Test the three criteria first.
Applying criterion (c) with only no alternative use, ignoring the enforceable right to payment.
Students remember only half of the condition.
Fix: Both conditions are needed: no alternative use and an enforceable right to payment for work done to date (including a reasonable profit margin).
Using all costs incurred in cost-to-cost without adjustment.
Formula is learnt mechanically.
Fix: Exclude costs that do not depict progress, such as abnormal wastage. Uninstalled materials are generally excluded from progress, with revenue at cost for those goods only when the specific conditions in the standard are met.
Reporting the full cumulative revenue as current-year revenue.
Forgetting revenue recognised in earlier years.
Fix: Current revenue = cumulative revenue to date − cumulative revenue recognised earlier.
Treating one control indicator, such as legal title retained, as decisive.
Students look for a single trigger.
Fix: Weigh all indicators. Retained title only as protection for payment does not by itself prevent transfer of control.

Worked examples

Example 1

Sunrise Constructions signs a contract to build a warehouse on the customer's own land for ₹5,00,00,000. Estimated total cost is ₹4,00,00,000. Costs incurred: Year 1 ₹1,00,00,000; Year 2 cumulative ₹3,00,00,000. Determine the revenue for Year 1 and Year 2 and justify the timing.

Show the solution

Timing: the warehouse is built on the customer's land, so the customer controls the asset as it is created. This meets criterion (b), so revenue is recognised over time.
Method: cost-to-cost input method is suitable as costs reflect the effort towards completion.
Year 1 progress = 1,00,00,000 ÷ 4,00,00,000 = 25%. Revenue = 25% × 5,00,00,000 = ₹1,25,00,000.
Year 2 progress = 3,00,00,000 ÷ 4,00,00,000 = 75%. Cumulative revenue = 75% × 5,00,00,000 = ₹3,75,00,000.
Year 2 revenue = 3,75,00,000 − 1,25,00,000 = ₹2,50,00,000.
Check: Year 2 cost = 3,00,00,000 − 1,00,00,000 = ₹2,00,00,000, so Year 2 profit = ₹50,00,000.

Answer: Revenue is ₹1,25,00,000 in Year 1 and ₹2,50,00,000 in Year 2, recognised over time under criterion (b).

Example 2

Vega Machines Ltd manufactures a standard lathe and sells it to a dealer for ₹12,00,000. The contract allows the dealer to cancel before delivery with no payment. On 20 March the machine is delivered to the dealer's premises. The dealer has the right to reject a machine that does not meet the agreed specification, and it accepts this machine on 25 March after testing it. The financial year ends 31 March. Title passes on full payment due 30 April. When should Vega recognise revenue?

Show the solution

Over-time test: (a) the dealer does not consume benefits as Vega builds. (b) The dealer does not control the work in progress. (c) A standard lathe has an alternative use and Vega has no enforceable right to payment before delivery, as the dealer can cancel with no payment. No criterion is met.
So revenue is recognised at a point in time, when control passes.
Indicators: physical possession passed on 20 March. Title passes only on payment, but this is a protective term for Vega's payment and does not by itself prevent control passing.
Acceptance is a substantive condition here, not a formality. Until the dealer accepts, it can reject a non-conforming machine, so it has not yet confirmed that it obtains the benefits of the asset as contracted.
Control is therefore judged to pass on acceptance on 25 March, when the dealer can direct the use of the machine and obtain substantially all its benefits.
25 March falls before the year end of 31 March, so the revenue belongs to the current year.

Answer: Vega recognises ₹12,00,000 as revenue at a point in time, on 25 March, in the current financial year.

Exam tips

Always write the over-time test first and name the criterion, even in a short answer. Examiners award marks for the reasoning.
In case-scenario MCQs, hunt for the facts: who owns the land, whether work is customised, and whether cancellation payments are enforceable.
Show the working as progress %, cumulative revenue, then current-year revenue, so partial marks are secured.
When a question mentions retained title, bill-and-hold or customer acceptance, turn to the control indicators and discuss at least three of them.
Check at the end whether the contract is loss-making. If so, add the onerous provision under Ind AS 37.

Practice questions from Ind AS 115 Revenue from Contracts with Customers

Recognising Revenue: Over Time and Point in Time in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Recognising Revenue: Over Time and Point in Time: frequently asked questions

What is the main difference between over time and point in time recognition?

Over time recognition spreads revenue as the entity performs, using a measure of progress. Point in time recognition books revenue in full on the date control passes. Both rest on transfer of control.

Can I choose either input or output method freely?

You choose the method that best depicts the transfer of control and apply it consistently to similar obligations. Cost-to-cost is common, but units delivered or milestones may be better where they show value to the customer.

Is transfer of risks and rewards the test for revenue under Ind AS 115?

No. Control is the test. Risks and rewards is only one of the indicators used when recognising revenue at a point in time.

What if progress cannot be measured reliably?

If the entity cannot reasonably measure the outcome but expects to recover the costs incurred, it recognises revenue only up to the costs incurred. It does this until it can measure progress reasonably.