CMA Intermediate · Cost Accounting · Contract Costing
Ind AS 115 (Revenue from Contracts with Customers) is applied to construction contracts by companies following Ind AS. Which statement reflects its approach?
Ind AS 115 recognises revenue when or as each performance obligation is satisfied. Where the over-time criteria are met, as in many construction contracts, revenue is recognised progressively. It is not tied to completion, cash receipts or billing alone.
- ARevenue is recognised only on completion of the contract
- BRevenue is recognised as the performance obligation is satisfied, which may be over time if the criteria are metCorrect
- CRevenue is recognised equal to cash received during the year
- DRevenue is recognised only when the contract price is fully billed
Explanation
Ind AS 115 uses a five-step model and recognises revenue when (or as) performance obligations are satisfied. For many construction contracts, control passes over time, so revenue is recognised over time. Completion-only, cash-based or billing-based recognition is not the Ind AS 115 basis.
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