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CA Final · Financial Reporting · Ind AS 115 Revenue from Contracts with Customers

A student comparing Ind AS 115 with IFRS 15 notes that Ind AS 115 differs on the treatment of penalties. Aryan Infra Ltd's contract with a customer includes a clause under which Aryan pays a penalty for delayed delivery. Which statement about the Ind AS 115 approach is correct?

Ind AS 115 removes penalties from the list of examples of variable consideration in paragraph 51 and inserts paragraph 51AA to explain how penalties are accounted for. This differs from IFRS 15, which includes penalties in paragraph 51 itself.

  1. AParagraph 51 of Ind AS 115 lists penalties among examples of why consideration may vary, same as IFRS 15
  2. BInd AS 115 ignores penalties completely, leaving them to be treated as general expenses
  3. CPenalties are deleted from the list of examples in paragraph 51 of Ind AS 115, and paragraph 51AA is inserted to explain their accounting treatmentCorrect
  4. DPenalties are explained in paragraph 109AA, which also deals with excise duty

Explanation

Ind AS 115 amends paragraph 51 to exclude penalties from the examples of why consideration may vary, and inserts paragraph 51AA to explain accounting for penalties. IFRS 15 lists penalties in paragraph 51, so the first option describes IFRS 15, not Ind AS 115. Paragraph 109AA concerns excise duty, not penalties.

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