Corporate Financial Reporting · Revenue from Contracts with Customers (Ind AS 115)

Ind AS 115 Satisfaction of Performance Obligations: Over Time vs Point in Time

Updated 11 October 2026 · Fact-checked

Under Ind AS 115, you decide at contract inception whether each performance obligation is satisfied over time or at a point in time. If over time, you recognise revenue by measuring progress, using an output or input method, and remeasure each reporting period. Otherwise, revenue is recognised at the point control transfers.

Understand Satisfaction of Performance Obligations

Revenue is recognised when you satisfy a performance obligation by transferring a promised good or service to the customer. The test is transfer of control, not shipping or invoicing.

For each performance obligation, you must decide at contract inception whether it is satisfied over time or at a point in time (para 32). If it does not meet the over-time criteria, it is satisfied at a point in time. This is a default rule, so always test the over-time criteria first.

The three over-time criteria sit in paras 35 to 37. In plain words: the customer receives and consumes the benefit as you perform; or your performance creates or enhances an asset the customer controls as it is created; or your performance creates an asset with no alternative use to you and you have an enforceable right to payment for work done to date. Meeting any one is enough.

If the obligation is satisfied over time, you recognise revenue by measuring progress. The objective is to depict your performance in transferring control (para 39). You may use output methods or input methods (paras 41 and B14), choosing based on the nature of the good or service. You apply a single method to each obligation, use it consistently for similar obligations, and remeasure progress at each reporting date (para 40).

If progress cannot be reasonably measured because reliable information is lacking, you do not recognise revenue over time (para 44). Changes in the measure of progress are a change in accounting estimate under Ind AS 8 (para 43). If the obligation is at a point in time, you recognise revenue when the customer obtains control, judged using indicators such as present right to payment, legal title, physical possession, risks and rewards, and customer acceptance. These indicators are in para 38, which is not in the text supplied here, so learn them from your study material.

Key rules to remember

Timing decision: Over time if any one criterion in paras 35 to 37 is met; otherwise point in time; Decide at contract inception for each performance obligation (para 32).
Output method: Progress % = value of goods or services transferred to date ÷ total value promised under the contract; Examples: surveys, appraisals, milestones, time elapsed, units produced or delivered (para B15).
Cost-based input method: Progress % = cost incurred to date ÷ total expected cost; Input methods use efforts such as costs, labour hours, machine hours. Adjust for costs that do not depict performance (para B19).
Cumulative revenue and period revenue: Revenue for the period = (Progress % × transaction price) − revenue recognised in earlier periods; This is the working method used to apply progress; it follows from remeasuring progress each period (para 40).
Costs excluded from input method: Exclude wasted costs from significant inefficiencies not reflected in price; exclude uninstalled-goods margin where the B19(b) conditions are met; For such goods, revenue may equal their cost (para B19(b)).
Single method rule: One method per performance obligation, applied consistently, progress remeasured each reporting date; Para 40.

How to solve Satisfaction of Performance Obligations questions

Use this order for any question on timing of revenue under Ind AS 115.

1Identify each performance obligation separately. Do not treat the whole contract as one unit unless it is one obligation.
2Test the over-time criteria in paras 35 to 37. If none is met, conclude point in time and look for control transfer.
3If point in time, find the date the customer obtains control using the indicators: right to payment, title, possession, risks and rewards, acceptance.
4If over time, choose a method of progress that fits the nature of the service: output or input (para 41).
5Compute progress. For cost-based input, remove costs that do not reflect performance, such as abnormal wastage, and handle goods not yet installed as para B19 requires.
6Compute cumulative revenue as progress % × transaction price, then deduct revenue already recognised to get the current period figure.
7Check whether progress can be reasonably measured (para 44). If not, do not recognise revenue over time.
8State the conclusion and note any change in estimate and disclosure of the method and why it is faithful (para 124).

Quickest way: Three-question shortcut

When to use it: Use in MCQs and in the first lines of a long answer when time is short.

Ask: does the customer get the benefit as I perform, control the asset as it is built, or is the asset without alternative use with a right to payment to date? Any yes means over time.
If over time, ask what best measures delivery: units, milestones or surveys (output), or cost and hours (input).
Compute cumulative progress × price, subtract earlier revenue, and stop. Remember to strip out abnormal wastage from costs.

Common mistakes in Satisfaction of Performance Obligations

Treating the timing decision as an accounting policy choice made at year end.
Students think revenue can be spread to smooth profit.
Fix: Remember that you assess each obligation at contract inception (para 32). It follows the criteria, not management preference.
Using total cost incurred in the input method even when part of it is abnormal wastage.
The formula looks purely mechanical.
Fix: Exclude costs from significant inefficiencies not reflected in the price (para B19(a)). State this adjustment explicitly.
Recognising the full cumulative revenue as current year revenue.
Students forget revenue from earlier periods.
Fix: Always deduct revenue recognised earlier. Show cumulative and period columns.
Using units produced as the output measure when the customer already controls work in progress.
Units produced seems the simplest measure.
Fix: An output method fails if it omits goods or services whose control has transferred (para B15). Choose another measure or an input method.
Switching methods each year for the same obligation.
Students confuse updating progress with changing the method.
Fix: Keep one method (para 40). Only the measure of progress is updated, and this is a change in estimate under Ind AS 8 (para 43).
Recognising revenue over time even when progress cannot be measured.
Students assume over time always means revenue every year.
Fix: Para 44 requires reliable information. Without it, revenue is not recognised over time.

Worked examples

Example 1

Aarav Constructions agrees to build a warehouse for Kaveri Logistics for ₹6,00,00,000. The asset is built on the customer's land and the customer controls it as it is built. Total expected cost is ₹4,50,00,000. Costs incurred: Year 1 ₹1,35,00,000; Year 2 cumulative ₹3,15,00,000. Use the cost-to-cost input method. Compute revenue for Year 1 and Year 2.

Show the solution

The customer controls the asset as it is created, so the obligation is satisfied over time.
Year 1 progress = 1,35,00,000 ÷ 4,50,00,000 = 30%.
Year 1 revenue = 30% × 6,00,00,000 = ₹1,80,00,000.
Year 2 cumulative progress = 3,15,00,000 ÷ 4,50,00,000 = 70%.
Cumulative revenue = 70% × 6,00,00,000 = ₹4,20,00,000.
Year 2 revenue = 4,20,00,000 − 1,80,00,000 = ₹2,40,00,000.

Answer: Revenue is ₹1,80,00,000 in Year 1 and ₹2,40,00,000 in Year 2.

Example 2

Meera Infra Ltd has a fixed-price contract of ₹10,00,000 for a customer-controlled asset, recognised over time on a cost-to-cost basis. Total expected cost is ₹8,00,000. By the year end, cost incurred is ₹5,00,000, which includes ₹1,00,000 of abnormal wastage from significant inefficiency not reflected in the contract price. Compute revenue for the year.

Show the solution

Wastage from significant inefficiency does not depict performance, so exclude it (para B19(a)).
Eligible cost = 5,00,000 − 1,00,000 = ₹4,00,000.
Total expected cost is ₹8,00,000, taken here as excluding the wastage, which is already incurred and not part of the expected cost to complete.
Progress = 4,00,000 ÷ 8,00,000 = 50%.
Revenue = 50% × 10,00,000 = ₹5,00,000.
The ₹1,00,000 wastage is expensed as incurred and does not generate revenue.

Answer: Revenue for the year is ₹5,00,000.

Exam tips

In MCQs, the point-in-time answer is the default. Pick over time only if one of the three criteria is clearly met.
In written answers, name the criterion met, then name the method, then compute. This order earns marks for reasoning even if arithmetic slips.
Always show cumulative revenue and revenue for the period. Examiners look for the deduction of earlier revenue.
Look for traps in the question: abnormal wastage, uninstalled materials bought from third parties, or a customer-controlled work in progress that breaks a units-produced measure.
Mention disclosure when asked for a full answer: the method used and why it is a faithful depiction (para 124).

Practice questions from Revenue from Contracts with Customers (Ind AS 115)

Satisfaction of Performance Obligations: frequently asked questions

How do I decide between over time and point in time under Ind AS 115?

Test the three over-time criteria in paras 35 to 37 for each performance obligation at inception. If any one is met, revenue is over time. If none is met, it is at a point in time (para 32).

What is the difference between input and output methods?

Output methods measure the value of goods or services transferred to date, such as milestones or units delivered. Input methods measure your efforts, such as costs or labour hours. The choice depends on the nature of what you promised (para 41).

Can I change the method of measuring progress each year?

No. You apply a single method to each performance obligation and use it consistently for similar obligations (para 40). What changes is the measure of progress, which you update each period as a change in estimate (para 43).

What if I cannot measure progress reliably?

Revenue for an over-time obligation is recognised only if progress can be reasonably measured. Without reliable information, you cannot recognise revenue over time (para 44).