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

Under Ind AS 115 as notified in India, which of the following is the treatment of 'penalties' in the paragraph dealing with items that cause the consideration in a contract to vary (paragraph 51)?

Ind AS 115 removes 'penalties' from the examples in paragraph 51 that cause consideration to vary. A new paragraph, 51AA, has been inserted to explain how penalties are accounted for. This is a carve-out from IFRS 15, which lists penalties within paragraph 51.

  1. APenalties are listed in paragraph 51 as a cause of variable consideration, as in IFRS 15
  2. BPenalties are excluded from the examples in paragraph 51, and paragraph 51AA separately explains their accounting treatmentCorrect
  3. CPenalties are ignored completely and no paragraph deals with them
  4. DPenalties are treated as variable consideration only for contracts with government customers

Explanation

The official comparison with IFRS 15 states that paragraph 51 of Ind AS 115 has been amended to exclude 'penalties' from its list of examples, and paragraph 51AA was inserted to explain the accounting treatment of penalties. The option saying penalties remain in paragraph 51 reflects IFRS 15, not Ind AS 115.

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