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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 statement correctly describes how penalties are dealt with, compared with IFRS 15?

Ind AS 115 differs from IFRS 15 by removing penalties from the examples of variable consideration in paragraph 51. Paragraph 51AA is inserted separately to explain how penalties are accounted for, so the Indian standard treats them through that dedicated paragraph.

  1. APenalties remain in the list of examples in paragraph 51 of variable consideration, exactly as in IFRS 15
  2. BParagraph 51 of Ind AS 115 omits penalties from its examples of variable consideration, and paragraph 51AA is inserted to explain the accounting treatment of penaltiesCorrect
  3. CPenalties are excluded from Ind AS 115 altogether and covered only by Ind AS 37
  4. DParagraph 51AA requires penalties to be shown as other expense and never as an adjustment to revenue

Explanation

The comparison with IFRS 15 states that Ind AS 115 paragraph 51 was amended to exclude penalties from the examples of why consideration can vary. Paragraph 51AA was inserted to explain the accounting for penalties. The first option describes IFRS 15, not Ind AS 115.

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