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

Under Ind AS 115 as notified in India, which statement about penalties in a contract with a customer is correct, compared with IFRS 15?

In Ind AS 115, penalties are removed from the examples of variable consideration in paragraph 51, unlike IFRS 15. Instead, paragraph 51AA was inserted to explain how penalties are accounted for. Hence the Indian standard treats penalties through a separate paragraph rather than within the list of variable consideration causes.

  1. APenalties are listed in paragraph 51 as an example of variable consideration, exactly as in IFRS 15
  2. BPenalties are excluded from the examples in paragraph 51 and their accounting is explained separately in paragraph 51AACorrect
  3. CPenalties are always recognised as expenses and never affect the transaction price
  4. DPenalties are deferred until the contract ends and then recognised in other comprehensive income

Explanation

Ind AS 115 amended paragraph 51 to remove 'penalties' from the list of reasons consideration can vary. A new paragraph 51AA was inserted to explain the accounting for penalties. The option stating that penalties remain in paragraph 51 reflects IFRS 15, not Ind AS 115.

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